Use the following information for questions$26-28.$ Ross Westerfield Corporation is an

all equity corporation with $20,000$ shares outstanding at a market price of $$70$ and

they are expecting perpetual EBIT of $$160,000.$ RW has a $100\%$ dividend payout

ratio. They are considering borrowing money at $10\%$ to raise their debt to equity ratio

to $2.$ Coach Buzzcut owns $300$ shares of RW$.$ There are no taxes

$26.$ Show Buzzcuts cash flows under the current capital structure

a$.$ $$2,000$

b$.$ $$2,200$

c$.$ $$2,400$

d$.$ $$2,600$

e$.$ $$2,800$

$27.$ Show Buzzcuts cash flow under the proposed capital structure.

a$.$ $$2,400$

b$.$ $$2,600$

$9$

c$.$ $$2,800$

d$.$ $$3,000$

e$.$ $$3,200$

$28.$ If RW stuck with the original capital structure, show how Buzzcut could replicate the

proposed capital structure.

a$.$ Sell $200$ shares and lend at $10\%$

b$.$ Borrow enough money at $10\%$ to buy $200$ more shares

c$.$ Sell $600$ shares and lend at $10\%$

d$.$ Borrow enough money at $10\%$ to buy $600$ more shares

e$.$ None of the above