Question
Your uncle is an entrepreneur and owns 100% of his faimly business. Currently , family business worth $2 million . He plans to raise additional
Your uncle is an entrepreneur and owns 100% of his faimly business. Currently , family business worth $2 million . He plans to raise additional $3 million to expand his business with one of the following plans: Plan 1: issue equity to outside investors Plan 2: issue debt at cost of borrowing of 7.3%. Assume there are no corporate taxes. After the expansion, company's EBIT will be $425,000 per year if your uncle works 40 hours each week, or $685,000 per year if he works 50 hours per week. .
In the equity finance case, what is your uncle's ownership of the company after expansion? (Do not round intermediate calculations and enter your answer as a percent , rounded to ZERO decimal places, for example, 35 ) .
In the equity finance case, what is your uncle's cash flow if he works 50-hour per week? ( Format and round to whole number, NO decimals,no "," , for example: 12500 ) .
In the debt finance case, what is the interest expense? ( Format and round to whole number, NO decimals,no "," , for example: 12500 ) .
In the debt finance case, what is your uncle's cash flow if he works 50-hour per week?
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