Examine the following book-value balance sheet for University Products Incorporated. The preferred stock currentlysells for $15 per share and pays a dividend of $3 a share. The common stock sells for $16 per share and has a beta of0.9. There are 2 million common shares outstanding. The market risk premium is 9%, the risk-free rate is 5%, and thefirm's tax rate is 21%.AssetsCash and short-term securitiesAccounts receivableInventoriesPlant and equipment.Total$2.03.07.021.0$ 33.0a. Market debt-to-value ratiob. WACCBOOK VALUE BALANCE SHEET(Figures in $ millions)Liabilities and Net WorthBonds, coupon = 6%, paid annually (maturity = 10 years, current.yield to maturity = 8%)Preferred stock (par value $15 per share)Common stock (par value $0.20)Additional paid-in stockholders' equityRetained earningsTotala. What is the market debt-to-value ratio of the firm?b. What is University's WACC?Note: For all the requirements, do not round intermediate calculations. Enter your answers as a percent roundedto 2 decimal places.$10.03.00.413.66.0$ 33.0%%

A company's average after-tax cost of capital from all sources, including common stock, preferred…

Examine the following book-value balance sheet for University Products Incorporated. The preferred stock currently sells for $15 per share and pays a dividend of $3 a share. The common stock sells for $16 per share and has a beta of 0.9. There are 2 million common shares outstanding. The market risk premium is 9%, the risk-free rate is 5%, and the firm's tax rate is 21%. Assets Cash and short-term securities Accounts receivable Inventories Plant and equipment Total $ 2.0 3.0 7.0 21.0 $ 33.0 BOOK VALUE BALANCE SHEET (Figures in $ millions) Liabilities and Net Worth Bonds, coupon 6%, paid annually (maturity = 10 years, current yield to maturity 8%) Preferred stock (par value $15 per share) Common stock (par value $0. 20) Additional paid-in stockholders' equity Retained earnings Total a. What is the market debt-to-value ratio of the firm? b. What is University's WACC? $ 10.0 3.0 0.4 13.6 6.0 $ 33.0

Examine the following book-value balance sheet for University Products Incorporated. The preferred stock currently sells for $15 per share and pays a dividend of $3 a share. The common stock sells for $16 per share and has a beta of 0.9. There are 2 million common shares outstanding. The market risk premium is 9%, the risk-free rate is 5%, and the firm's tax rate is 21%. Assets Cash and short-term securities Accounts receivable Inventories Plant and equipment Total $ 2.0 3.0 7.0 21.0 $ 33.0 BOOK VALUE BALANCE SHEET (Figures in $ millions) Liabilities and Net Worth Bonds, coupon 6%, paid annually (maturity = 10 years, current yield to maturity 8%) Preferred stock (par value $15 per share) Common stock (par value $0. 20) Additional paid-in stockholders' equity Retained earnings Total a. What is the market debt-to-value ratio of the firm? b. What is University's WACC? $ 10.0 3.0 0.4 13.6 6.0 $ 33.0

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 2MAD

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