WACC. Look at the following book-value balance sheet for University Products Inc. The preferred stock currently sells for $15 per share and pays a dividend of $2 a share. The coomon stock sells for $20 per share and has a beta of .8. There are 1 million common shares outstanding. The market risk premium is 10%, the risk free rate is 6% and the firm's tax rate is 40%
Assets (all numbers are in the millions)
Cash& short -term securities $1 M
Accounts Receivable $3 M
Inventories $7m
Plant and Equipment $21M
Total Assets $32
Liabilities and Net Worth
Bonds, coupon=8%, paid annually(maturity =10 years, current yield to maturity=9%) $10M
Preferred stock (par value $20 per share) $2M
Common Stock (Par Value $.10) $0.1M
Additional paid n stockholders equity $9.9M
Retained Earning $10M
Total Liabilities and Net Worth $32M
A) What is the market debt to value ratio of the firm?
B) What is University's WACC?