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The table shows the year-end book-value balance sheet for the company A. Use this information to answer questions below. ($Millions) Assets Liabilities and Equity Cash

The table shows the year-end book-value balance sheet for the company A. Use this information to answer questions below. ($Millions)

Assets

Liabilities and Equity

Cash

$1

Bonds

$10

A/R

3

Preferred Stock

2

Inventories

7

Common stock

10

Plant and Equipment

21

R/E

10

Total

$32

Total

$32

The bond has a face value of $1000, whose coupon rate is 8%. Coupons are paid annually, and the bond will mature in 10 years. The current yield to maturity is 9%. The preferred stock has a par value of $20 per share, and it pays a dividend of $2 per share. The beta of the common stock is 1.5; the market risk premium is 7%

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