Examine the following book$-$value balance sheet for University Products Incorporated. The preferred stock currently sells for $$15$ per share and pays a dividend of $$3$ a share. The common stock sells for $$20$ per share and has a beta of $0\mathrm{.}7.$ There are $2$ million common shares outstanding. The market risk premium is $12\%,$ the risk$-$free rate is $8\%,$ and the firm$$s tax rate is $21\%.$

BOOK$-$VALUE BALANCE SHEET

$($Figures in $ millions$)$

Assets Liabilities and Net Worth

Cash and short$-$term securities $ $1\mathrm{.}0$ Bonds, coupon $=6\%,$ paid annually $($maturity $=10$ years, current yield to maturity $=8\%)$ $ $10\mathrm{.}0$

Accounts receivable $4\mathrm{.}0$ Preferred stock $($par value $$20$ per share$)3\mathrm{.}0$

Inventories $8\mathrm{.}0$ Common stock $($par value $$0\mathrm{.}10)0\mathrm{.}2$

Plant and equipment $24\mathrm{.}0$ Additional paid$-$in stockholders$$ equity $10\mathrm{.}8$

Retained earnings $13\mathrm{.}0$

Total $ $37\mathrm{.}0$ Total $ $37\mathrm{.}0$