What is her cash flow now

Assignment Help Finance Basics

Reference no: EM13274083

Star, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Currently there are 14,000 shares outstanding and the price per share is $63. EBIT is expected to remain at $77,000 per year forever. The interest rate on new debt is 7 percent, and there are no taxes.

a. Ms. Brown, a shareholder of the firm, owns 250 shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

b. What will Ms. Browns cash flow be under the proposed capital structure of the firm? Assume that she keeps all 250 of her shares. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

c. Assume that Ms. Brown unlevers her shares and re-creates the original capital structure. What is her cash flow now? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Reference no: EM13274083

Questions Cloud

What is the next cash flow of this arbitrage strategy : What is the next cash flow of this arbitrage strategy at the option expiration date, assuming that stock XLT trades at $23 at expiration three months from now?

Construct a sequential circuit with two data inputs : Construct a sequential circuit with two data inputs, A and B and two data outputs X and Y whose sequential behavior is as follows: the machine accepts data on the two input lines synchronously with the clock.

What is the internal rate of return for the two investments : What is the internal rate of return for the two investments? Which investment(s) should the firm make? Is this the same answer you obtained in part A

What is the radius of the nozzel : If the radius of a hose is 1cm, the pressure is 300kpa, and velocity is 1.8m/s, what is the radius of the nozzel

What is her cash flow now : What will Ms. Browns cash flow be under the proposed capital structure of the firm? Assume that she keeps all 250 of her shares. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

What is the resistance per unit length of the nichrome wire : The potentiometer extends between positions 1.9 cm and 54.6 cm on the scale. The voltage read by the DMM is 1.000 V and the current read the by DMM is 42mA. What is the resistance per unit length of the nichrome wire

Calculate the difference in masses of the two ions : two singly charged ions moving perpendicular to a uniform magnetic field B=0.4T each has a speed of 500 km/s, calculate the difference in masses of the two ions

Create behavioral dataflow description to create comparator : Using verilog hardware descriptional language or vhdl create a non-expandable dataflow description of a 2-bit magnitude comparator, from that create a behavioral dataflow description to create an expandable 2-bit magnitude comparator

Explain what is the percent-yield of h2 in the reaction : What is the percent-yield of H2 in the reaction below when an equimolar mixture of CH4 and CO2 with an initial total pressure of 20.0 atm reaches equilibrium at 1200. K, at which Kp = 3.548 x 106

User Account

All Pages