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

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 0.7. There are 1 million common shares outstanding. The market risk premium is 8%, the risk-free rate is 4%, and the firms tax rate is 40%.

BOOK-VALUE BALANCE SHEET
(Figures in $ millions)
Assets					Liabilities and Net Worth
Cash and short-term securities	$	2.0			Bonds, coupon = 6%, paid annually (maturity = 10 years, current yield to maturity = 7%)	$	10.0
Accounts receivable		5.0			Preferred stock (par value $10 per share)		3.0
Inventories		9.0			Common stock (par value $0.10)		0.1
Plant and equipment		22.0			Additional paid-in stockholders equity		8.9
					Retained earnings		16.0
Total	$	38.0			Total	$	38.0