Question: Finch, Incorporated, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Currently, there are 18,000 shares

Allison, a shareholder of the firm, owns 250 shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent?

Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

What will Allisons cash flow be under the proposed capital structure of the firm? Assume she keeps all 250 of her shares.

Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Assume that Allison unlevers her shares and re-creates the original capital structure. What is her cash flow now?

Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Finch, Incorporated, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Currently, there are 18,000 shares outstanding and the price per share is $49. EBIT is expected to remain at $63,000 per year forever. The interest rate on new debt is 10 percent, and there are no taxes. a. Allison, a shareholder of the firm, owns 250 shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What will Allison's cash flow be under the proposed capital structure of the firm? Assume she keeps all 250 of her shares. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. c. Assume that Allison unlevers her shares and re-creates the original capital structure. What is her cash flow now? Note: Do not round intermediate calculations and round your answer to

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Caspian Sea has a beta of 1.11 . The market risk premium is 6.18 percent, and T-bills are currently yielding 3.9 percent. The most recent dividend was $3.59 per share, and dividends are expected to...

What will Allison's cash flow be under the proposed capital structure of the firm? Assume that she keeps all 100 of her shares. Finch, Incorporated, is debating whether or not to convert its...

Finch, Incorporated, is debating whether or not to convert its all - equity capital structure to one that is 3 0 percent debt. Currently, there are 1 3 , 0 0 0 shares outstanding and the price per...

Thank you in advance Finch, Incorporated, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Currently, there are 8,000 shares outstanding and the...

Finch, Incorporated, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Currently, there are 14,000 shares outstanding and the price per share is...

Finch, Incorporated, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Currently there are 14,000 shares outstanding and the price per share is...

Finch, Incorporated, is debating whether or not to convert its all - equity capital structure to one that is 3 0 percent debt. Currently, there are 5 , 0 0 0 shares outstanding and the price per...

Finch, Incorporated, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Currently, there are 20,000 shares outstanding and the price per share is...

Finch, Incorporated, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Currently, there are 8,000 shares outstanding and the price per share is...

Finch, Incorporated, is debating whether or not to convert its all - equity capital structure to one that is 3 0 percent debt. Currently, there are 8 , 0 0 0 shares outstanding and the price per...

True or False: If V1 and V2 are vector spaces and the dim(V1)

1. Integrate the following: 1. dx (4) I V5x2

The mortgage on your house is 5 5 years old. It required monthly payments of $ 1 comma 4 5 0 1 , 4 5 0 , had an original term of 3 0 3 0 years , and had an interest rate of 8 % 8 % ( APR ) . In the...