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

Long-term debt $850,000 5.5% Preferred stock $80,000 10.6% Common stock equity $600,000 14.9%

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.

a.The firm's weighted average cost of capital,r sub a,

using market value weights is __.

(Round to two decimal places.)