What is the market debt-to-value ratio of the firm

Assignment Help Financial Management
Reference no: EM131896772

Examine the following book-value balance sheet for University Products Inc. The preferred stock currently sells for $30 per share and pays a dividend of $3 a share. The common stock sells for $16 per share and has a beta of 0.6. There are 3 million common shares outstanding. The market risk premium is 10%, the risk-free rate is 6%, 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 = 7%, paid annually (maturity = 10 years, current yield to maturity = 8%) $ 10.0 Accounts receivable 5.0 Preferred stock (par value $10 per share) 3.0 Inventories 9.0 Common stock (par value $0.10) 0.3 Plant and equipment 20.0 Additional paid-in stockholders’ equity 11.7 Retained earnings 10.0 Total $ 35.0 Total $ 35.0

a. What is the market debt-to-value ratio of the firm? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. What is University’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Reference no: EM131896772

Questions Cloud

Discounted payback period if discount rate is zero percent : What is the discounted payback period if the discount rate is zero percent?
The common stock of alpha manufacturers : The common stock of Alpha Manufacturers has a beta of 3.14 and an actual expected return of 15.26 percent.
What is meant by buying bond indirectly : What is meant by buying bond indirectly?
Calculate foust after tax cost of debt and common equity : Calculate Foust's after tax cost of debt and common equity. Calculate the cost of equity as rs=D1/P0+G
What is the market debt-to-value ratio of the firm : Examine the following book-value balance sheet for University Products Inc. What is the market debt-to-value ratio of the firm? What is University’s WACC?
What is company total market value of debt : What is the company's total book value of debt? What is your best estimate of the aftertax cost of debt? What is the company’s total market value of debt?
What is garbanzo corporation expected current share price : What is the expected return on the portfolio? what is Garbanzo Corporation's expected current share price?
Constant growth valuation-stock price is expected one year : Constant growth valuation-What stock price is expected 1 year from now? What is the required rate of return?
Won settlement with an insurance : Samantha just won a settlement with an insurance company, What is the amount that she should accept in this scenario?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd