9:03 ess A OLTE1+973 3717 3177Just nowLOHomemade Leverage Pagemaster Enterprises is considering a change from its current capital structure.The company currently has an all-equity capital structure and is considering a capital structure witn 25percent debt. There are currently 8,i00 shares outstanding at a price per share of $50. EBIT is expectedto remain constant at $44,000. The interest rate on new debt is 7 percent and there are no taxesat. Rebecca owns $17,000 worth of stock in the company. If the firm has a 100 percent payout, what isher cash flow?b. What would her cash flow be under the new capital structure assuming that she keeps all of hershares?c. Suppose the company does convert to the new capital structure. Show how Rebecca can maintainher current cash flow.d. Under your answer to part (c), explain why the company's choice of capital structure is irrelevant.10Calsulating ACC BuII

“Since you have posted a question with multiple subparts, we will solve first three subparts for…

a. Rebecca owns $17,000 worth of stock in the company. If the firm has a 100 percent payout, what is her cash flow? b. What would her cash flow be under the new capital structure assuming that she keeps all of her shares? c. Suppose the company does convert to the new capital structure. Show how Rebecca can maintain her current cash flow.

a. Rebecca owns $17,000 worth of stock in the company. If the firm has a 100 percent payout, what is her cash flow? b. What would her cash flow be under the new capital structure assuming that she keeps all of her shares? c. Suppose the company does convert to the new capital structure. Show how Rebecca can maintain her current cash flow.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Scenario: Matthew Mulatto and his brother John Mulatto plans to open a business. The major decision they face is how to organize the business. They expect to generate a massive profit during the first year. Although they have enough to start the business now as a partnership, they believe cash flow may be an issue as they grow. They believe that the corporate form of operation will be best option. They have hired you as a consultant and seek your advice. Requirements: Answer the following questions for the Mulatto brothers. How are paid-in-capital and retained earnings: Similar? Different? What are the main categories of paid-in capital? When does a company declare a cash dividend? Which characteristic of a corporation limits a stockholder's loss to the amount of his or her investment in the stock of the corporation? What does the term par value of stock mean? The owners are desirous of comparing serval financial transactions and possible outcomes to assist…
Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Brandtly does not pay any dividends, and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Brandtly's stock. The pension fund manager has estimated Brandtly's free cash flows for the next 4 years as follows: $2 million, $5 million, $12 million, and $15 million. After the fourth year, free cash flow is projected to grow at a constant 3%. Brandtly's WACC is 11%, the market value of its debt and preferred stock totals $52 million; the firm has $14 million in non-operating assets; and it has 8 million shares of common stock outstanding. What is the present value of the free cash flows projected during the next 4 years? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000.$ What…
Ab. 127.
Help Save & Ex Chee Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $918,400 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the company. Under the plans for the investment, the VC will hold 16,400 shares in the company and the two entrepreneurs will have combined holdings of 24,600 shares. a. What is the total after-the-money valuation of the firm? (Enter your answer in dollars not millions.) Valuation of the firm b. What value is the venture capitalist placing on each share? Value of each share < Prev 2 of 8 Next m arch hp 寻

Scenario: John Brown is considering opening a business, but the major decision faced is how to organize the business. John anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. John believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice. Required: Answer the following questions for John. Explain the corporate characteristic termed “no mutual agency” Explain the corporate characteristic termed limited liability. Explain the term outstanding stock.
No. 2: La Pizza della Nonna Corporation, S.A. It is in the process of selling shares in the Roman market to achieve an expansion of its business throughout the Italian nation. To do this, the president of the company, Mr. Giuseppe Pomodoro, and his wife, Ms. Alessandra Tiramisú, have hired him to help them determine the value range of the Corporation, using the discounted cash flow method. The information available for this assessment was collected by the Financial Manager, the MBA Giacomo Pizza and is detailed below:• Sales for the next three years in units: 42,750; 37,500 and 65,000.• Unit price: in euros of year 1: € 17.65• Inflation of income: according to Sales Manager Giancarlo Panetone it is 12% per year. • Cost of sales: 37.5% of sales.• Fixed operating costs are in the order of € 10,450.00 • Operating expenses: 2.75% of sales.• Cost inflation according to the Production Manager Ing. Chiara Gelatti is 9.5% per year.• The company must contribute a working capital of € 5,000.00.…
Mr. Yamcie Oliva considers investing his PHP 100,000 wealth into two assets: SM Prime Holdings Inc. (SMPH) and Jollibee Foods Corp. His friend, Ms. Julie-Anne Ilquin, a financial analyst who works at JD Morguens, suggests partitioning his wealth by investing 70% of it in the stock that has a higher average daily rate of return, and the remaining 30% be invested in the other asset. Mr. Oliva has the following data points of the historical prices for day x= 0, 1,2, ..., 8, HP,, of SMPH and JFC: SMPH| JFC 36.4 245.2 Day x 35.5 245.8 36 249.2 35.95 249 4 35.9 245 36.85 244.6 37.5 248 37.05 245.4 36.6 243.8 9. 36.9 245 a. Mr. Oliva wishes to calculate the daily rate of return R(x) for days x = 1,2, ..,9 using the following formula: HP, – HP,-1 R(x) : HPx-1 Generate a table showing the daliy rate of return for both assets. b. It is known that the average daily rate of return can be calculated by solving the following definite integral: R(x)dx, where a is the maximum number of days you…

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS