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Could you help me calculate this please? FCOJ, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity capital structure
Could you help me calculate this please?
FCOJ, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Currently, there are 5, 700 shares outstanding and the price per share is $54. EBIT is expected to remain at $20, 585 per year forever. The interest rate on new debt is 12 percent, and there are no taxes. Melanie, a shareholder of the firm, owns 260 shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Shareholder cash flow $ 938.96 What will Melanie's cash flow be under the proposed capital structure of the firm? Assume that she keeps all 260 of her shares. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Shareholder cash flow $ Suppose FCOJ does convert, but Melanie prefers the current all-equity capital structure. Show how she could unclever her shares of stock to recreate the original capital structure. Number of shares stockholder should sellStep by Step Solution
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