Question: PLEASE HELP ASAP ILL RATE goodlier The total book value of WTCs equity is $8 million, and book value per share is $20. The stock
PLEASE HELP ASAP ILL RATE goodlier
The total book value of WTCs equity is $8 million, and book value per share is $20. The stock has a market-to-book ratio of 1.5, and the cost of equity is 13%. The firms bonds have a face value of $5 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 10%, and the firms tax rate is 21%. What is the companys 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 $15 per share and pays a dividend of $3 a share. The common stock sells for $20 per share and has a beta of 0.8. There are 2 million common shares outstanding. The market risk premium is 10%, the risk-free rate is 5%, and the firms tax rate is 21%.
| BOOK-VALUE BALANCE SHEET | ||||||||
| (Figures in $ millions) | ||||||||
| Assets | Liabilities and Net Worth | |||||||
| Cash and short-term securities | $ | 2.0 | Bonds, coupon = 5%, paid annually (maturity = 10 years, current yield to maturity = 6%) | $ | 10.0 | |||
| Accounts receivable | 6.0 | Preferred stock (par value $10 per share) | 3.0 | |||||
| Inventories | 10.0 | Common stock (par value $0.10) | 0.2 | |||||
| Plant and equipment | 23.0 | Additional paid-in stockholders equity | 19.8 | |||||
| Retained earnings | 8.0 | |||||||
| Total | $ | 41.0 | Total | $ | 41.0 | |||
a. What is the market debt-to-value ratio of the firm?
b. What is Universitys WACC?
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