***I've asked this same question twice already and each have been wrong. Can anyone help, please? Thank you!!!!!****
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 $20 per share and has a beta of .7. There are 2 million common shares outstanding. The market risk premium is 10%, the risk-free rate is 6%, and the firmâs 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%) $ 5.0 Accounts receivable 4.0 Preferred stock (par value $10 per share) 3.0 Inventories 8.0 Common stock (par value $.10) .2 Plant and equipment 24.0 Additional paid-in stockholdersâ equity 17.8 Retained earnings 11.0 Total $ 37.0 Total $ 37.0
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.)
Market debt ratio %
b. What is Universityâs WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
WACC %
***I've asked this same question twice already and each have been wrong. Can anyone help, please? Thank you!!!!!****
| 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 $20 per share and has a beta of .7. There are 2 million common shares outstanding. The market risk premium is 10%, the risk-free rate is 6%, and the firmâs 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%) | $ | 5.0 | ||
| Accounts receivable | 4.0 | Preferred stock (par value $10 per share) | 3.0 | ||||
| Inventories | 8.0 | Common stock (par value $.10) | .2 | ||||
| Plant and equipment | 24.0 | Additional paid-in stockholdersâ equity | 17.8 | ||||
| Retained earnings | 11.0 | ||||||
| Total | $ | 37.0 | Total | $ | 37.0 | ||
| 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.) |
| Market debt ratio | % |
| b. | What is Universityâs WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) |
| WACC | % |
Related questions
| ****(Can someone please show me the breakdown step-by-step (instead of using an excel spreadsheet) 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 $20 per share and has a beta of .7. There are 2 million common shares outstanding. The market risk premium is 10%, the risk-free rate is 6%, and the firmâs 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%) | $ | 5.0 | ||
| Accounts receivable | 4.0 | Preferred stock (par value $10 per share) | 3.0 | ||||
| Inventories | 8.0 | Common stock (par value $.10) | .2 | ||||
| Plant and equipment | 24.0 | Additional paid-in stockholdersâ equity | 17.8 | ||||
| Retained earnings | 11.0 | ||||||
| Total | $ | 37.0 | Total | $ | 37.0 | ||
| 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.) |
| Market debt ratio | % |
| b. | What is Universityâs WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) |
| WACC | % |
| ***Would it be possible for you to help me break this down step-by-step instead of using Excel. I'm struggling to understand all of the steps in solving. THANK YOU!***** 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 $20 per share and has a beta of .7. There are 2 million common shares outstanding. The market risk premium is 10%, the risk-free rate is 6%, and the firmâs 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%) | $ | 5.0 | ||
| Accounts receivable | 4.0 | Preferred stock (par value $10 per share) | 3.0 | ||||
| Inventories | 8.0 | Common stock (par value $.10) | .2 | ||||
| Plant and equipment | 24.0 | Additional paid-in stockholdersâ equity | 17.8 | ||||
| Retained earnings | 11.0 | ||||||
| Total | $ | 37.0 | Total | $ | 37.0 | ||
| 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.) |
| Market debt ratio | % |
| b. | What is Universityâs WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) |
| WACC | % |
