Extracts from the book-value balance sheet of university, Ask an Expert

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Extracts from the book-value balance sheet of University Products Inc are shown below. The preferred stock currently sells for $15 per share and pays a dividend of $2 a share. The common stock sells for $20 per share and has a beta of 0.8. There are 1 million common shares outstanding. The market risk premium is 10%, the risk-free rate is 6%, and the firm’s tax rate is 40%. BOOK-VALUE BALANCE SHEET (Figures in $ millions) Bonds, coupon = 8%, paid annually (maturity = 10 years, current yield to maturity = 9%) $ 10.0 Preferred stock (par value $20 per share) 2.0 Common stock (par value $.10) 0.1 What is University Product's WACC? (You will first have to solve for the price of the firm's bonds). Express your answer as a percentage rounded to 2 decimal places.

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