Question: Examine he book value balance sheet of University Products Inc. What is the capital structure of the firm based on market values? The preferred stock currently sells for $ 15 per share and the common stock for $ 20 per share. There are one million common shares outstanding.
BOOK VALUE BALANCE SHEET
(all values in millions)
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Assets
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Liabilities and Net Worth
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Cash and short-term securities
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$ 1
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Bonds, coupon = 8%, paid
annually (maturity = 10 years, current yield to maturity = 9%)
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$10.0
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Accounts receivable
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3
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Preferred stock (par value $20 per share)
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2.0
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Inventories
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7
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Common stock (par value $.10)
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.1
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Plant and equipment
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21
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Additional paid in stockholders' capital
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9.9
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Retained earnings
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10.0
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Total
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$32
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Total
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$32.0
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