Bigquiz Corporation
(in millions) ($ millions)
		2018	2019
sales			550
cost of goods sold			400
depreciation			100
interest rate			10.0%
payout			40.0%
tax rate			30.0%
account receivable		26	30
cash		20
inventory		28	32
net fixed asset		300	345
account payable		20	25
note payable		10	10
long-term debt		100	120
common stock		60	60
retained earning		184
shares outstanding			10

1. In perfect market without tax, Rebacca has 300 shares, how much is her cash flow now? The firm is considering a capital restructuring, in which the firm will switch to all-equity finance, how much is her cash flow if the firm is all-equity financed. If the firm does convert to all-equity financed, , how can Rebacca maintain her current cash flow ? In terms of cash flow, will Rebacca be better off if the company switch to all-equity finance? How much is the cost of equity before and after the capital restructuring? How much is the stock price before and after the capital restructuring? In terms of value, will Rebacca be better off if the company switch to all-equity finance? What conclusion can you draw, why?
2. Currently the company pays 50% as dividend. Rebacca owns 300 shares. What happens to her cash flow and her total wealth if the company choose to 1) pay zero dividend 2) pay 100% dividend 3) uses the net income to buyback stocks.