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Staal Enterprises is considering a change from its current capital structure. Staal currently has an all-equity capital structure and is considering a capital structure with
Staal Enterprises is considering a change from its current capital structure. Staal currently has an all-equity capital structure and is considering a capital structure with 25 percent debt. There are currently 4,500 shares outstanding at a price per share of $60. EBIT is expected to remain constant at $33,000. The interest rate on new debt is 7 percent and there are no taxes. Required: (a) Rebecca owns $18,000 worth of stock in the company. If the firm has a 100 percent payout, what is her cash flow? (Do not include the dollar sign ($).) Shareholder cash flow $ (b) What would her cash flow be under the new capital structure assuming that she keeps all of her shares? (Do not include the dollar sign ($). Round your answer to 2 decimal places (e.g., 32.16).) Shareholder cash flow $ (c) Suppose the company does convert to the new capital structure. Show how Rebecca can maintain her current cash flow. Number of shares stockholder should sell
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