star inc

Question 1 (7 points) Star, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity capital structure to one that is 20 percent debt. Currently there are 3,000 shar iutstanding and the price per share is $40. EBrT is expected to remain at $24,000 per year forever. The interest rate on new debt is 8 percent, and there are no taxes. Ms. Brown, a shareholder of the firm, owns 100 shares of stock. What is her nate of return under the current capital structure, assuming the firm has a dividend payout rate of 100 percent? 20.25% 20% 18.75%