Examine the following book-value balance sheet for University Products Inc. 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 0.7. There are 2 million common shares outstanding. The market risk premium is 12%, the risk-free rate is 8%, and the firms tax rate is 21%.

BOOK-VALUE BALANCE SHEET
(Figures in $ millions)
Assets					Liabilities and Net Worth
Cash and short-term securities	$	2.0			Bonds, coupon = 5%, paid annually (maturity = 10 years, current yield to maturity = 7%)	$	10.0
Accounts receivable		3.0			Preferred stock (par value $20 per share)		3.0
Inventories		7.0			Common stock (par value $0.10)		0.2
Plant and equipment		25.0			Additional paid-in stockholders equity		11.8
					Retained earnings		12.0
Total	$	37.0			Total	$	37.0

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

b. What is Universitys WACC?

Problem 13-7 WACC (LO1) Examine the following book-value balance sheet for University Products Inc. 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 0.7. 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%. Assets Cash and short-term securities Accounts receivable Inventories Plant and equipment $ 2.0 3.0 7.0 25.0 BOOK-VALUE BALANCE SHEET (Figures in $ millions) Liabilities and Net Worth Bonds, coupon = 5%, paid annually (maturity = 10 years, current yield to maturity = 7%) Preferred stock (par value $20 per share) Common stock (par value $0.10) Additional paid-in stockholders' equity Retained earnings Total MO 11.8 12. $37.0 Total $37.0 a. What is the market debt-to-value ratio of the firm? b. What is University's WACC? (For all the requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)