Examine the following book-value balance sheet for

Reference no: EM13571103

Examine the following book-value balance sheet for University Products, Inc. The preferred stock currently sells for $15 per share and the common stock for $20 per share.

BOOK VALUE BALANCE SHEET (all values in millions)
Assets			Liabilities and Net Worth
Cash and short-term securities	$	2.0	Bonds, coupon = 8%, paid annually (maturity = 10 years, current yield to maturity = 9%)	$	10.0
Accounts receivable		5.0	Preferred stock (par value $20 per share)		4.0
Inventories		9.0	Common stock (par value $0.1)		0.3
Plant and equipment		26.0	Additional paid-in stockholders' equity		16.7
			Retained earnings		11.0

Total	$	42.0	Total	$	42.0

If the preferred stock pays a dividend of $2 per share, the beta of the common stock is 0.2, the market risk premium is 10%, the risk-free rate is 6%, and the firm's tax rate is 20%, what is University's weighted-average cost of capital? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

WACC	% Make sure to do proper rounding for each section before submitting answers!

Reference no: EM13571103

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