1. Sport L&K Company produces annual cash flows of $671 dollars and is expected to exist forever. The company is currently financed with 50 percent equity. Your analysis tells you that the appropriate discount rates are 12.71 percent for the cash flows, and 6.95 percent for the debt. You currently own 6 percent of the shares. Assume that all conditions identified by the M&M Proposition 1 apply. How much are your cash flows today? The answer should be 29.25

2. Sport L&K Company produces annual cash flows of $202 dollars and is expected to exist forever. The company is currently financed with 74 percent equity. Your analysis tells you that the appropriate discount rates are 10.46 percent for the cash flows, and 5.69 percent for the debt. You currently own 13 percent of the shares. If Sport L&K wishes to change its capital structure from 74 percent to 59 percent equity and use the debt proceeds to pay a special dividend to shareholders, how much debt should the company issue? Assume that all conditions identified by the M&M Proposition 1 apply. The answer should be 289.67

3. Sport L&K Company produces annual cash flows of $817 dollars and is expected to exist forever. The company is currently financed with 69 percent equity. Your analysis tells you that the appropriate discount rates are 13.10 percent for the cash flows, and 6.50 percent for the debt. You currently own 14 percent of the shares. Sport L&K wishes to change its capital structure from 69 percent to 51 percent equity and use the debt proceeds to pay a special dividend to shareholders. How much will it have to pay in interest after the restructuring assuming that the cost of debt is constant? Assume that all conditions identified by the M&M Proposition 1 apply. The answer should be 198.64