Problem 13-7 WACC (LO1)
Examine the following book value balance sheet for University Products Incorporated. The preferred stock currently sells for $15 per
share and pays a dividend of $3 a sbare. The common stock sells for $20 per share and has a beta of 0.6. There are 1 million common
shares outstanding. The market risk premium is %, the risk free rate is 7%, and the firm's tax rate is 2%
BOOK-VALUE BALANCE SHEET
(figures in millions)
Assets
Liabilities and Worth
Bonds, coupon 5%, paid annually (naturity 10 years,
Cash and short-term securities $ 2.0
current yield to maturity) $10.0
Accounts receivable 5.0 Preferred stock (par value $10 per share) 3.4
Inventories 9.8 Common stock (par value 58.201 8.2
Plant and equipment 25.0 Additional paid in stockholders' equity 12.8
Retained earnings 15.0
Total $41.8 Total $41.8
What is the market debt-to-value ratio of the f
What is University's WACC?
Note: For all the requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal
places.
WACC