Examine the following book-value balance sheet for University Products, Inc. The preferred stock currently sells for $15 per share and the common stock for $20 per share.

There are 1 million common shares outstanding.

If the preferred stock pays a dividend of $2 per share, the beta of the common stock is .8, the market risk premium is 10%, the risk-free rate is 6%, and the firm's tax rate is 40%, what is University's weighted-average cost of capital?

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(all values in millions) Assets Liabilities and Net Worth Cash and short-term securities | $ 1.00 | Bonds, coupon-8%, paid annually (maturity = 10 years, current yield to maturity-900) S 10.00 Accounts receivable 3.00 Preferred stock (par value S20 per 2.00 0.10 share) 7.00 Common stock (par value S.10) 21.00 Additional paid-in stockholders Inventories Plant and equipment equity Retained earnings 9.90 10.00 S 32.00 Total S 32.00 Total Preferred stock current price Common stock current price Bond Coupon Bond par value Maturity Current yield to maturity Preferred stock par value Common stock par value Common shares outstanding Preferred stock dividend Common stock beta Market risk premium Risk-free rate Tax Rate 15.00 20.00 8% 1,000.00 10.00 years 9% S 20.00 010 1.00 million 2.00 0.80 10% 6% 40%