Homemade Leverage Finch, Inc., is debating whether or not to convert its all - equity capital structure
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Question:
Homemade Leverage Finch, Inc., is debating whether or not to convert its allequity capital structure to one that is percent debt. Currently there are shares out standing and the price per share is $ EBIT is expected to remain at $ per year forever. The interest rate on new debt is percent and there are no taxes. a Allison, a shareholder of the firm, owns shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of percent? b What will Allisons cash flow be under the proposed capital structure of the firm? Assume that she keeps all of her shares. c Suppose the
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