Question: Lemansky Enterprises is considering a change from its current capital structure. The company currently has an all-equity capita! structure and is considering a capital structure
Lemansky Enterprises is considering a change from its current capital structure. The company currently has an all-equity capita! structure and is considering a capital structure with 30 percent debt. There are currently 8,320 shares outstanding at a price per 5 hare of $50. EBIT is expected to remain constant at $57,720. The interest rate on new debt is 5 percent and there are no taxes. a. Rebecca owns $16,000 worth of stock in the company. If the firm has a 100 percent payout, what is her cash fiow? Note: Do not round intermedlate calculations and round your answer to 2 decimal places, 32.16. b. What would her cash flow be under the new capital structure assuming that she keeps all of her shares? Note: Do not round intermedlate calculations and round your answer to 2 decimal places, 32.16. c. Suppose the company does convert to the new capital structure. Show how Rebecca can maintain her current cash fiow. Note: Do not round intermedlate calculations and round your answer to the nearest whole number, 32
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
