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Category > Business & Finance Posted 01 Jun 2017 My Price 7.00

Examine the following book-value balance sheet for University Products,

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 $16 per share.

 

BOOK VALUE BALANCE SHEET
(all values in millions)
Assets Liabilities and Net Worth
Cash and short-term securities $ 2.0 Bonds, coupon = 6%, paid annually
(maturity = 10 years, current yield to
maturity = 7%)		 $ 10.0
Accounts receivable   5.0 Preferred stock (par value $10 per
share)		   1.0
Inventories   9.0 Common stock (par value $0.1)   0.2
Plant and equipment   22.0 Additional paid-in stockholders%u2019 equity   8.8
      Retained earnings   18.0
 
 
Total $ 38.0 Total $ 38.0
 
 

 

If the preferred stock pays a dividend of $2 per share, the beta of the common stock is 0.2, the market risk premium is 12%, the risk-free rate is 8%, and the firm%u2019s tax rate is 30%, what is University%u2019s weighted-average cost of capital? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

WACC %
 

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Status NEW Posted 01 Jun 2017 06:06 AM My Price 7.00

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