Finch, Incorporated, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Currently, there are 5,000 shares outstanding and the price per share is $86. EBIT is expected to remain at $26,000 per year forever. The interest rate on new debt is 4.5 percent, and there are no taxes.

a) Allison, a shareholder of the firm, owns 150 shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

b) What will Allisons cash flow be under the proposed capital structure of the firm? Assume she keeps all 150 of her shares. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

c) Assume that Allison unlevers her shares and re-creates the original capital structure. What is her cash flow now? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

\begin{tabular}{|l|rr|} \hline a. Cash flow & $ & 780.00 \\ \hline b. Cash flow & $ & 1,120.50 \\ \hline c. Cash flow & $ & 605.85 \\ \hline \end{tabular}