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Cowardly Lion Enterprises is an all-equity capital structure. The interest rate on new debt is 9 percent and there are no taxes. Shareholder Rita Cavendish

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Cowardly Lion Enterprises is an all-equity capital structure. The interest rate on new debt is 9 percent and there are no taxes. Shareholder Rita Cavendish knows that Cowardly Lion has not moved to becoming a levered firm Rita wants to change the cash flows to mimic what Cowardly Lion's cash flows would be if it were a levered firm. How could she do this using Homemade Capital Stucture? Rit could all other hands and land all of the money attorcroate Cowardly Lions Rita could sell all of her shares and lend all of the money at 9% to recreate Cowardly Lion's levered recapitalization O Rita could borrow at 9% and then purchase more cowardly Lion shares to create a levered holding, similar to if Cowardly Lion's had decided to use leverage. Rita could send a letter of complaint to the Board of Directors asking them to use debt. Rita could sell some of her Cowardly Lion shares and lond the money received at 9% to mimic Cowardly Lion's recapitalization if it had used debt

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