Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Lemansiky Enterprises is considering a change from its current capital structure. The company currently has an all-equity capital structure and is considering a capital structure

image text in transcribed
Lemansiky Enterprises is considering a change from its current capital structure. The company currently has an all-equity capital structure and is considering a capital structure with 35 percent debt: There are currently 6,000 shares outstanding at a price per share of \$90. EBIT is expected to remain constant at $75,000. The interest rate on new debt is 12 percent and there are no taxes. a. Rebecca owns $36,000 worth of stock in the company. If the firm has a 100 percent payout, what is her cash flow? Note: Do not round intermediate calculations and round your answer to 2 decimal places, 32.16. b. What would her cash flow be under the new capital structure assuming that she keeps all of her shares? Note: Do not round intermediate calculations and round your answer to 2 decimal places, 32.16 . c. Suppose the company does convert to the new capital structure. Show how Rebecca can maintain her current cash flow. Note: Do not round intermediate calculations and round your answer to the nearest whole number, 32

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Forex This Book Includes Forex Beginners Forex

Authors: Jordon Sykes

1st Edition

154063180X, 978-1540631800

More Books

Students also viewed these Finance questions