WACC-Market value weights 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. a. The firm's weighted average cost of capital, ra, using market value weights is %. (Round to two decimal places.) Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Source of capital Market value Individual cost $700,000 $30,000 $600,000 Long-term debt 6.2% Preferred stock 11.9% Common stock equity 16.5% Print Done
WACC-Market value weights 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. a. The firm's weighted average cost of capital, ra, using market value weights is %. (Round to two decimal places.) Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Source of capital Market value Individual cost $700,000 $30,000 $600,000 Long-term debt 6.2% Preferred stock 11.9% Common stock equity 16.5% Print Done
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:WACC-Market value weights 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.
a. The firm's weighted average cost of capital, ra, using market value weights is %. (Round to two decimal places.)
Data Table
(Click on the icon located on the top-right corner of the data table below in order to
copy its contents into a spreadsheet.)
Source of capital
Market value
Individual cost
$700,000
$30,000
$600,000
Long-term debt
6.2%
Preferred stock
11.9%
Common stock equity
16.5%
Print
Done
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