Look at the following book-value balance sheet for Ursula Corporation. The preferred stock currently sells for 15 per share and pays a dividend of 2 a share. The common stock currently sells for 20 per share and has a beta of 0.80. The bonds currently sell at 935.82. The market return is 16%, the Treasury Bill rate is 6%, and the firms tax rate is 40%.

2. Calculate the firms market value capital structure. (6 points)

BOOK-VALUE BALANCE SHEET (Figures in millions) Assets Liabilities and Equity Cash and short-term securities 1 Bonds (par value 1000; coupon 8% paid annually; maturity 10 years; yield to maturity 9%) 10 Accounts receivable 3 Preferred stock (par value 20) N Inventories 7 Common stock (par value 0.10) 0.1 Plant and equipment 21 Additional paid-in stockholders' equity 9.9 Retained earnings 10 Total 32 32