1. Sport L&K Company produces annual cash flows of $847 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 9.05 percent for the cash flows, and 7.20 percent for the debt. You currently own 10 percent of the shares. Sport L&K wishes to change its capital structure from 69 percent to 57 percent equity and use the debt proceeds to pay a special dividend to shareholders. How much of the special dividend do you receive? Assume that all conditions identified by the M&M Proposition 1 apply. The answer should be 112.31

2. Sport L&K Company produces annual cash flows of $321 dollars and is expected to exist forever. The company is currently financed with 78 percent equity. Your analysis tells you that the appropriate discount rates are 14.97 percent for the cash flows, and 5.76 percent for the debt. You currently own 13 percent of the shares. Sport L&K wishes to change its capital structure from 78 percent to 54 percent equity and use the debt proceeds to pay a special dividend to shareholders. How much do you receive in regular dividends annually after the restructuring?

Assume that all conditions identified by the M&M Proposition 1 apply. The answer should be 34.34