p9-13

1WACC: Market value weights The market values and after-tax costs of various ources of capital used by Ridge Tool are shown in the following table. Source of capital Long-term debt Preferred stock Common stock equity Market value $700,000 50,000 650,000 Individual cost 5.3% 12.0 16.0 a. Calculate the firm's WACC. b. Explain how the firm can use this cost in the investment decision-making process. WACC: Book weights and market weights Webster Company has compiled the information shown in the following table. P9-14