answers Homemade Leverage [LO1] Desert Rose, Inc., a prominent consumer products firm, is debating whether to convert its all-equity capital structure to one that is 30 percent debt. Currently, there are 6,500 shares outstanding, and the price per share is $45. EBIT is expected to remain at $29,000 per year forever. The interest rate on new debt is 8 percent, and there are no taxes. 8. a. Allison, a shareholder of the firm, owns 100 shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent? b. What will Allison's cash flow be under the proposed capital structure of the firm? Assume she keeps all 100 of her sha res. e company does convert, but Allison prefers the current all-equity ow how she could unlever her shares of stock to re-create the c. Suppose th capital structure. Sh original capital structure. d. Using your answer to part (c), explain why the company's choice of capital struc- ture is irrelevant