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

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