Using the balance sheet provided for Universal Exports, determine the weighted average cost of capital. The firm's tax rate is 20%, the preferred stock pays a dividend of $0.45 pershare, the beta of the stock is 1.86, the market risk premium is and the risk-free rate is 6%. Assume that the book value capital structure weights are the company's optimal weights.

$Millions

Assets:

Cash and Short-Term Securities $1

Accounts receivable $5

Inventories 6

Plant and Equipment $19

Total 31

Liabilitites and owner's equity

Bonds (7%annual coupon, 20year maturity, 9% YTM) $13

Preferred stock (market price = $3.05) $5

Common stock $13

Total $31

A) What is the proportion of debt in the firm's capitalstructure, Wd?

B) What is the proportion of preferred stock in the firm's capital structure, Wp?

C) What is the proportion of common equity in the firm's capital structure, We?

D) What is the after-tax cost of debt for UniversalExports?

E) What is the cost of preferred stock for UniversalExports?

F) What is the cost of common equity for Universal Exports? Note that the problem gives us the amount of the market riskpremium, which is equal to (Km-Kf)

G) What is the WACC for Universal Exports?