Hello Guys, Can you please solve only the colered blanks? Thanks Problem 13-9 Th

ID: 2768733 • Letter: H

Question

Hello Guys,

Can you please solve only the colered blanks?

Thanks

Problem 13-9 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 6.4%, and are currently selling to yield 10%. Assume that the coupon payments are semi-annual. Develop Albertson's capital structure based on both book and market values. Round the values to the nearest dollar. Round the weights to two decimal places. Enter the weights in whole numbers and not in percentages. Do not round your intermediate calculations Weights 235 294 471 Weights 165 212 623 Book Market Debt Preferred Stock Common Equity $ 200000 250000 400000 $850000 187500 550000

Explanation / Answer

Answer to Problem 13-9:

Portfolio

Market

Weight

Debt

$ 145,500

0.165

Preferred stock

$ 187,500

0.212

Common equity

$ 550,000

0.623

$ 883,000

Calculate the debt = $550,000 * 0.165/ 0.623

= $145,500 (rounded off)

Calculate the portfolio total ($145,500 + $187,500 +$550,000) = $883,000

Answer to Problem 14-6:

All amounts are dollars in thousands ($000)

EPS = (Net income – Preferred dividend) / Weighted average common shares outstanding

Current level at 15%:

EPS = $2,021 / 425,000

= $0.00476

Proposal level at 30%:

EPS = $1,798 / 350,000

= $0.00514

Proposal level at 45%:

EPS = $1,575 / 275,000

= $0.00573

Proposal level at 60%:

EPS = $1,352 / 200,000

= $0.00676

Proposal level at 75%:

EPS = $1,128 / 125,000

= $0.009024