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Cash flow under the proposed capital structure

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FCOK, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity capital structure to one that is 24% debt. Currently there are 5,546 shares outstanding and the price per share is $43.71. EBIT is expected to remain at $62,114 per year forever. The interest rate on new debt is 6.06% and there are no taxes. Ms. Brown, a shareholder of the firm, owns 126 shares of stock. What is her cash flow under the proposed capital structure (with the debt), assuming the firm has a dividend payout rate of 100%.

Reference no: EM133059714

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