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Q1) Ridge Tool has on its books amounts and specific (after tax) costs given in the table for each source of capital,

Source of capital	Book value	Specific cost
Long term debt	$700,000	5.30%
Preferred stock	$50,000	12
Common stock equity	650,000	16

a. Compute firm's weighted average cost of capital by using book value weights.

b. Describe how firm can use cost in investment decision-making process.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M917362

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