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What will their cash flow be under current capital structure

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Question - Devonshire Corporation is a web development company that is debating whether to convert its all-equity capital structure to one that is 35% debt. There are currently 6,500 shares outstanding, and the price per share is $45. Earnings (EBIT) are expected to remain at $29,000 per year forever. The interest rate on new debt is 8% and there are no taxes.

One of the shareholders owns 1,000 shares. What will their cash flow be under the current capital structure, assuming a dividend payout rate of 100%?

Reference no: EM133149957

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