The market price of Albertson Ltd.s common stock is $5.50 and 100,000 shares are outstanding. The firms

Question:

The market price of Albertson Ltd.’s common stock is $5.50 and 100,000 shares are outstanding. The firm’s books show common equity accounts totaling $400,000. There are 5,000 preferred shares outstanding that originally sold for their par value of $50, pay an annual dividend of $3, and are currently selling to yield an 8% return. Also, 200 bonds are outstanding that were issued 5 years ago at their $1,000 face values for 30-year terms, pay a coupon rate of 7%, and are currently selling to yield 10%. Develop Albertson’s capital structure based on both book and market values.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...