What is her cash flow under the proposed capital structure

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Question - FCOK, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity capital structure to one that is 38% debt. Currently there are 7,180 shares outstanding and the price per share is $41.14. EBIT is expected to remain at $55,404 per year forever. The interest rate on new debt is 10.69% and there are no taxes.

Ms. Brown, a shareholder of the firm, owns 116 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: EM132922242

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