Business, 12.03.2020 05:59 Kimberlytdb

Look at the following book-value balance sheet for University Products Inc. The pre- ferred stock currently sells for $15 per share and pays a dividend of $2 a share. The common stock sells for $20 per share and has a beta of .8. There are 1 million common shares outstanding. The market risk premium is 10%, the risk-free rate is 6%, and the firm’s tax rate is 40%. (LO13-1) Security Market Value Required Rate of Return Debt $20 million 6% Preferred stock 10 million 8 Common stock 50 million 12 BOOK-VALUE BALANCE SHEET (Figures in $ millions) Assets Liabilities and Net Worth Cash and short-term securities $1 Bonds, coupon = 8%, paid annually (maturity = 10 years, current yield to maturity = 9%) $10 Accounts receivable 3 Preferred stock (par value $20 per share) 2 Inventories 7 Common stock (par value $.10) 0.1 Plant and equipment 21 Additional paid-in stockholders’ equity 9.9 Retained earnings 10 Total $32 $32 a. What is the market debt-to-value ratio of the firm? b. What is University’s WACC?

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Look at the following book-value balance sheet for University Products Inc. The pre- ferred stock cu...