How much cash flow does olaf get

Reference no: EM133664066

Problem: Those who manage the company Hraoval, which is financed only with their own capital, are now wondering whether they should take a loan so that the company's financing will be 30% in the form of debt and 70% in the form of equity. The outstanding number of shares in the company is 4,000 and the market value of each share is 100. Profit before capital items (ie EBIT) is 20,000 per year and will be like this. The company currently offers loan terms of 4% on the market. Where the company operates, no taxes are collected. How much cash flow does Olaf, a shareholder who owns 100 shares in the company, get, assuming that all profits are paid out in the form of dividends each year?

Reference no: EM133664066

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