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What is her cash flow under the proposed capital structure

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Reference no: EM132924141

Question - FCOK, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity capital structure to one that is 20% debt. Currently there are 5,657 shares outstanding and the price per share is $40.3. EBIT is expected to remain at $61,552 per year forever. The interest rate on new debt is 11.83% and there are no taxes.

Ms. Brown, a shareholder of the firm, owns 127 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: EM132924141

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