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Examine the following book-value balance sheet for University Products, Inc. The preferred stock currently sells for $10 per share and the common stock for $20
Examine the following book-value balance sheet for University Products, Inc. The preferred stock currently sells for $10 per share and the common stock for $20 per share.
| BOOK VALUE BALANCE SHEET (all values 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 = 6%) | $ | 10.0 |
| Accounts receivable | 6.0 | Preferred stock (par value $10 per share) | 2.0 | ||
| Inventories | 10.0 | Common stock (par value $0.2) | 0.1 | ||
| Plant and equipment | 23.0 | Additional paid-in stockholders | |||
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