Question
A company with 6,000 shares outstanding is considering converting its all-equity capital structure to one that is 25% debt. The interest rate on new debt
A company with 6,000 shares outstanding is considering converting its all-equity capital structure to one that is 25% debt. The interest rate on new debt is 5%. EBIT is expected to remain at $30,000 per year forever and the company has a dividend payout rate of 100%. The companys stock currently sells on the market for $50 per share. You own 70 shares of this companys stock. What will your cash flow be under the proposed capital structure? Assume there are no taxes. (Round the final answer to 2 decimal places. Do not round intermediate calculations. Omit $ sign in your response.)
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