Examine the following book-value balance sheet for University Products Inc. The preferred stock currently sells for $30 per share and pays a dividend of $3 a share. The common stock sells for $16 per share and has a beta of 0.9. There are 3 million common shares outstanding. The market risk premium is 10%, the risk-free rate is 6%, and the firms tax rate is 40%.

a. What is the market debt-to-value ratio of the firm?

b. What is University's WACC?

BOOK-VALUE BALANCE SHEET (Figures in $ millions) Liabilities and Net Worth Bonds, coupon = 8%, paid annually (maturity = 10 years, current yield to maturity = 98) $20.0 Preferred stock (par value $15 per share) Common stock (par value $0.10) Additional paid-in stockholders' equity Retained earnings AssetS cash and short-term securities s 3.0 3.0 7.0 21.0 3.0 0.3 5.7 5.0 $34.0 Accounts receivable Inventories Plant and equipment $34.0Total Total