Examine the following book-value balance sheet for University Products Inc. The preferred stock currently sells...
60.1K
Verified Solution
Link Copied!
Question
Finance
Examine the following book-value balance sheet for University Products Inc. The preferred stock currently sells for $15 per share and pays a dividend of $3 a share. The common stock sells for $20 per share and has a beta of 0.6. There are 3 million common shares outstanding. The market risk premium is 9%, the risk-free rate is 5%, and the firm's tax rate is 21%. Assets BOOK-VALUE BALANCE SHEET (Figures in $ millions) Liabilities and Net Worth Bonds, coupon = 8%, paid annually (maturity = 10 years, current yield to maturity Preferred stock (par value $20 per share) Common stock (par value $0.10) Additional paid-in stockholders' equity Retained earnings Cash and short-term securities $ 2.0 Accounts receivable 5.0 Inventories 9.0 Plant and equipment 26.0 9%) $10.0 3.0 0.3 16.7 12.0 $ 42.0 Total $ 42.0 Total a. What is the market debt-to-value ratio of the firm? b. What is University's WACC? (For all the requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) a. Market debt-to-value ratio % b. WACC %
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
