Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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 $10 per share and has a beta of 0.9. There are 4 million common shares outstanding. The market risk premium is 8%, the risk-free rate is 4%, and the firm's tax rate is 40% BOOK-VALUE BALANCE SHEET (Figures in $ millions) Liabilities and Net Worth Assets Bonds, coupon (maturity Preferred stock (par value $20 per share) Common stock (par value $0.10) Additional paid-in stockholders' equity Retained earnings 58, paid annually =10 years, current yield to maturity Cash and short-term securities $ 3.0 $20.0 7) Accounts receivable 3.0 3.0 Inventories 7.0 0.4 Plant and equipment 25.0 7.6 7.0 $38.0 $38.0 Total Total a. What is the market debt-to-value ratio of the firm? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Market debt-to-value ratio % b. What is University's WACC? (Do not round intermediate calculations. Enter your answer places.) percent rounded to 2 decimal as a WACC
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started