Question

Please solve using excel!

WACCMarket value weights The market values andafter-tax costs of various sources of capital used by Ridge Tool are shown in the followingtable: LOADING...

Source of capital Market Value Individual Cost

Long-term debt $700,000 5.3%

Preferred stock $50,000 12.0%

Common stock equity $650,000 16.0%

a. Calculate thefirm's weighted average cost of capital.

b.Explain how the firm can use this cost in the investmentdecision-making process.