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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
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 firm's tax rate is 40% BOOK-VALUE BALANCE SHEET (Figures in $ millions) Liabilities and Net Worth Assets Bonds, coupon = 8%, paid annually (maturity= 10 years, current yield to maturity = 9%) Preferred stock (par value $15 per share) Common stock (par value $0.10) Additional paid-in stockholders ' equity Retained earnings Cash and short-term securities $ 3.0 3.0 $20.0 Accounts receivable 3.0 0.3 Inventories 7.0 Plant and equipment 21.0 5.7 5.0 $34.0 $34.0 Total Total a. What is the market debt-to-value ratio of the firm? (Do not round intermediate calculations. Enter your answer as rounded to 2 decimal places.) percent Market debt-to-value ratio b. What is University's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) WACC %
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