Question: Question 7 (20 points) The following table shows the book-value balance sheet for Skyline Corporation. BOOK-VALUE BALANCE SHEET (in $ millions) Assets Liabilities and Equity

Question 7 (20 points) The following table shows the book-value balance sheet for Skyline Corporation. BOOK-VALUE BALANCE SHEET (in $ millions) Assets Liabilities and Equity Cash and short-term securities $4.2 Bonds (coupon = 6%, paid annually) $8 Accounts receivable $4.4 Preferred stock (par value $9 per share) $1.8 Inventories $1.5 Common stock (par value $3) $6 Property, plant and equipment $7.7 Retained earnings $2 Total $17.8 Total $17.8 The company bond issues outstanding has a face value of $10 million. The bond matures in 9 years, and the current yield to maturity is 8%. The preferred stock currently sells for $11 per share and pays a dividend of $5.5 per share. The common stock currently sells for $16 per share and has a beta of 0.86. There are 2 million common shares outstanding. The market rate of return is 12%, the risk-free rate is 3%, and the firm's tax rate is 30%. What is the company's WACC? a

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