Question: Ridge Tool has on its books the amounts and specific (after-tax) costs shown in the following table for each source of capital. a. Calculate the

Ridge Tool has on its books the amounts and specific (after-tax) costs shown in the following table for each source of capital.

a. Calculate the firm€™s weighted average cost of capital using book value weights.
b. Explain how the firm can use this cost in the investment decision-makingprocess.

Book valuc ndividual cost Source of capital Long-term debt Preferred stock Common stock cquity $700,000 50,000 650,000 5.3% 12.0 16.0

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