Examine the following book-value balance sheet for University Products Inc. The preferred stock currently sells for...

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Examine the following book-value balance sheet for UniversityProducts Inc. The preferred stock currently sells for $30 per shareand pays a dividend of $3 a share. The common stock sells for $16per share and has a beta of 0.9. There are 1 million common sharesoutstanding. The market risk premium is 11%, the risk-free rate is7%, and the firm’s tax rate is 40%.
BOOK-VALUE BALANCE SHEET
(Figures in $ millions)
Assets Liabilities and Net Worth
Cash and short-term securities $ 1.0 Bonds, coupon = 6%, paid annually
(maturity = 10 years, current yield to maturity = 7%) $ 5.0
Accounts receivable 3.0 Preferred stock (par value $10 per share) 3.0
Inventories 7.0 Common stock (par value $0.20) 0.2
Plant and equipment 21.0 Additional paid-in stockholders’ equity 11.8
Retained earnings 12.0
Total $ 32.0 Total $ 32.0
a. What is the market debt-to-value ratio ofthe firm? (Do not round intermediate calculations. Enteryour answer as a percent rounded to 2 decimal places.)
b. What is University’s WACC? (Do notround intermediate calculations. Enter your answer as a percentrounded to 2 decimal places.)

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Examine the following book-value balance sheet for UniversityProducts Inc. The preferred stock currently sells for $30 per shareand pays a dividend of $3 a share. The common stock sells for $16per share and has a beta of 0.9. There are 1 million common sharesoutstanding. The market risk premium is 11%, the risk-free rate is7%, and the firm’s tax rate is 40%.BOOK-VALUE BALANCE SHEET(Figures in $ millions)AssetsLiabilities and Net WorthCash and short-term securities$1.0Bonds, coupon = 6%, paid annually(maturity = 10 years, current yield to maturity = 7%)$5.0Accounts receivable3.0Preferred stock (par value $10 per share)3.0Inventories7.0Common stock (par value $0.20)0.2Plant and equipment21.0Additional paid-in stockholders’ equity11.8 Retained earnings12.0Total$32.0Total$32.0a. What is the market debt-to-value ratio ofthe firm? (Do not round intermediate calculations. Enteryour answer as a percent rounded to 2 decimal places.)b. What is University’s WACC? (Do notround intermediate calculations. Enter your answer as a percentrounded to 2 decimal places.)

BOOK-VALUE BALANCE SHEET
(Figures in $ millions)
Assets			Liabilities and Net Worth
Cash and short-term securities	$	1.0	Bonds, coupon = 6%, paid annually (maturity = 10 years, current yield to maturity = 7%)	$	5.0
Accounts receivable		3.0	Preferred stock (par value $10 per share)		3.0
Inventories		7.0	Common stock (par value $0.20)		0.2
Plant and equipment		21.0	Additional paid-in stockholders’ equity		11.8
			Retained earnings		12.0
Total	$	32.0	Total	$	32.0