Using the balance sheet provided for Universal$$ Exports, determine the weighted average cost of capital. The$$ firm's tax rate is $30\%,$ the preferred stock pays a dividend of $$$$0\mathrm{.}50$ per$$ share, the beta of the stock is $1\mathrm{.}63,$ the market risk premium is $5\%,$ and the$$ risk$-$free rate is $3\%.$ Assume that the book value capital structure weights are the$$ company's optimal weights.

Universal Exports Balance Sheet$($$ millions$)$

Assets

Liabilities$$ & Owner's Equity

Cash and$$ Short$-$term securities

$3$

$$

Bonds $(9\%$ annual$$ coupon,

$10-$year $$maturity$,8\%$YTM$)$

$12$

$$

Accounts receivable

$6$

Preferred stock$$

$($market price $=$ $$4\mathrm{.}72)$

$6$

Inventories

$7$

Common stock

$20$

Plant and equipment

$22$

Total

$38$

Total

$38$

Enter answers as percentages. Round all answers to two decimal places.

What is the proportion of debt in the$$ firm's capital$$ structure? $$

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What is the proportion of preferred stock in the$$ firm's capital$$ structure?

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What is the proportion of common equity in the$$ firm's capital$$ structure?

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What is the$$ after$-$tax cost of debt for Universal$$ Exports?$$

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What is the cost of preferred stock for Universal$$ Exports?$$

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What is the cost of common equity for Universal$$ Exports? Note that the problem gives us the amount of the market risk$$ premium, which is equal to $($km$-$kf$)$:

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What is the WACC for Universal$$ Exports?

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