15 Examine the following book-value balance sheet for University Products, Inc. What is the capital structure of the firm on the basis of market values? The preferred stock currently sells for $15 per share and the common stock for $20 per share. There are 1 million common shares outstanding.
Book Value Balance Sheet
(all values in millions)
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Cash and short-term securities | $1 | Bonds, coupon= 8%, paid annually (maturity= 10years, current yield to maturity =9%) | $10.0 |
Accounts receivable | 3 | Preferred stock (par value $20 per share) | 2.0 |
Inventories | 7 | Common stock (par value $.10) | .1 |
Plant and equipment | 21 | Additional paid-in stockholders’ | 9.9 |
capital Retained Earnings | 10.0 | ||
Total | $32 | Total | 32.0 |
Cash and short-term securities | $1 | Bonds, coupon= 8%, paid annually (maturity= 10years, current yield to maturity =9%) | $10.0 |
Accounts receivable | 3 | Preferred stock (par value $20 per share) | 2.0 |
Inventories | 7 | Common stock (par value $.10) | .1 |
Plant and equipment | 21 | Additional paid-in stockholders’ | 9.9 |
capital Retained Earnings | 10.0 | ||
Total | $32 | Total | 32.0 |
