WACC-Book weights Ridge Tool has on its books the amounts and specific (after-tax) costs shown in the following table for each source of capital:

Source of capital
Book value
Individual cost
Long-term debt
$800 comma 000800,000
5.55.5%
Preferred stock
$50 comma 00050,000
12.912.9%
Common stock equity
$450 comma 000450,000
15.715.7%
1) Thefirm's weighted average cost ofcapital, ra, using book value weights is % (round to 2 decimal places)

2) Explain how the firm can use this cost in the investmentdecision-making process. (select best answer)

A. The WACC is the rate of return that the firm must 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. B. The WACC is the rate of return that the firm must exceed on long-term projects to maintain the value of the firm. The cost of capital can be compared to the dollar value for a project to determine whether the project is acceptable. C. The WACC is the rate of return that the firm must not exceed 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. D. The WACC is the rate of return that the firm must receive on short-term projects to maintain the value of the firm. The cost of capital can be compared to the dollar value for a project to determine whether the project is acceptable.