WAcc-Book weights Rdge Tool has on ts books the amounts and specie (athter-tax)
ID: 2618226 • Letter: W
Question
WAcc-Book weights Rdge Tool has on ts books the amounts and specie (athter-tax) costs shown in the following table for each source of capital a. Calculate the firms weighted average cost of capitl ng book value weights b. Explain how the firm can use this cost in the investment decision-making proces a. The trm's weighted average cost of capita. '« using book value weights is ?% (Round to two decimal places ) b. Explain how me firm, can use this cost n nvestment decision-making process (Select te best answer below) OA. The WACC is the rate of return that the 5m must not exceed on long-erm projects to maintain the velue of the fim The cost of capital can be compared to the retum for a project to determine whether the project is ecceptable ??. The WA C is the rate ofret m that es m must receive on long4erm priects to ma tan the value of the finn The cost of capital can be compared to the rour tor a pro ect to determine whether the pro ect is acceptable O C. The WACC is the rate of returm that the 5m must receive on shot-erm projects to maintain the value of the m The cost of capitel can be compared to the dollar value for a project to determine whether the project is acceptable D. The WACC is the rane of retun that the 5rm must enceed on long-erm projects to maintain the value of the fem. The cost of capital can be compared to the dollar value for a project to determine whether the project is acceptable Data Table Cick on the lcon localed on the 5op-right comer of the data table below in order to copy its contents into a spreadsheet Praferred stock $70,000 118%Explanation / Answer
1.
=(950000*6.7%+70000*11.8%+600000*16.9%)/(950000+70000+600000)=10.6981%
2.
Option B
THe WACC is the rate of return that the firm mist receive on long-term projects to maintain the value of the firm. THe cost of capital can be compared to the return for a project to determine whether the project is acceptable
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