According to the balance sheet, if the preferred stock pays a dividend of $2 per share, the beta of the common tsock is .8, the market risk premium is 10%, the risk free rate is 6%, and the firm's tax rate is 40%, what is University's weighted-average cost of capital?
Assets
Cash and short term securites = $1
Accounts receivable= $3
Inventories= $7
Plant and equipment= $21
Total = $32
Liabilties and net worth Bonds, coupon= 8%, paid annually (maturity =10 yrs, current YTM= 9%) = $10.0
Preferred stock (par value $20 per share) = $2.0 $
Common stock (par value $.10) = .1
Additional paid-in stockholders capital = 9.9
Retained earnings = 10.0
Total = $32.0