The market values and after-tax costs of various sources of capital used by Ridge Tool are shown in the following table:

a. Calculate the firm's weighted average cost of capital.

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

- Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Source of capital Market value Individual cost Long-term debt $850,000 5.5% Preferred stock $80,000 10.3% Common stock equity $600,000 15.1% Print Done