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According to the balance sheet, if the preferred stock pays a dividend of $2 per share, the beta of the common tsock is .8, the market risk premium is 10%, the risk free rate is 6%, and the firm's tax rate is 40%, what is University's weighted-average cost of capital?
AssetsCash and short term securites = $1Accounts receivable= $3Inventories= $7Plant and equipment= $21
Total = $32
Liabilties and net worth Bonds, coupon= 8%, paid annually (maturity =10 yrs, current YTM= 9%) = $10.0Preferred stock (par value $20 per share) = $2.0 $Common stock (par value $.10) = .1
Additional paid-in stockholders capital = 9.9
Retained earnings = 10.0
Total = $32.0
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