Assuming that Blaine pays out all its net income as dividends and that shareholders pay 36% tax rate on dividend income, what is the after-tax cash flow to shareholders under current capital structure? What is the total after-tax cash flow to shareholders and debtholders under the proposed capital structure with the repurchase assuming Blaine's debtholders as well as shareholders pay taxes on interest income at the rate of 30.8%? [Please note that under the proposed capital structure, in addition to dividends, Blaine's shareholders will also earn interest on $259 million of cash they receive from Blaine because of the share repurchase. You can assume that the interest rate Blaine's shareholders earn on cash received from the repurchase is 5.85%.]

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AfterTax Cash Flow Analysis for Blaines Shareholders and Debtholders Current Capital Structure Ident... View the full answer