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 $20 per share and has a beta of .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 40%.

BOOK-VALUE BALANCE SHEET
(Figures in $ millions)
Assets				Liabilities and Net Worth
Cash and short-term securities	$	1.0		Bonds, coupon = 6%, paid annually (maturity = 10 years, current yield to maturity = 8%)	$	15.0
Accounts receivable		4.0		Preferred stock (par value $20 per share)		3.0
Inventories		8.0		Common stock (par value $.10)		.2
Plant and equipment		24.0		Additional paid-in stockholders equity		10.8
				Retained earnings		8.0
Total	$	37.0		Total	$	37.0

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 ratio

%

b.	What is Universitys WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

WACC

%

References