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Examine the following book-value balance sheet for University Products Inc. The preferred stock currently sells for...

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 0.6. There are 3 million common shares outstanding. The market risk premium is 9%, the risk-free rate is 5%, and the firm’s 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 = 8%, paid annually
(maturity = 10 years, current yield to maturity = 9%)		 $ 10.0
Accounts receivable 5.0 Preferred stock (par value $20 per share) 3.0
Inventories 9.0 Common stock (par value $0.10) 0.3
Plant and equipment 26.0 Additional paid-in stockholders’ equity 16.7
   Retained earnings 12.0
Total $ 42.0 Total $ 42.0

a. What is the market debt-to-value ratio of the firm?

b. What is University’s WACC?

(For all the requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.

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