Question
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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