Question
In: Finance
Pagemaster Enterprises is considering a change from its current capital structure. The company currently has an...
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 with 25% debt. There are currently 4,500 shares outstanding at a price per share of $60. EBIT is expected to remain constant at $33,000. The interest rate on the new debt is 7% and there are no taxes.
a) Rebecca owns $18,000 worth of stock in the company. If the firm has a 100% 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.
Solutions
jeff jeffy answered 7 months agoRelated Solutions
Pagemaster Enterprises is considering a change from its current capital structure. The company currently has an...
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 with 40 percent
debt. There are currently 2,500 shares outstanding at a price per
share of $80. EBIT is expected to remain constant at $23,990. The
interest rate on new debt is 10 percent and there are no taxes.
a.
Rebecca owns $20,000 worth of stock in the company. If the firm
has a 100...
Pagemaster Enterprises is considering a change from its current capital structure. The company currently has an...
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 with 45 percent
debt. There are currently 2,000 shares outstanding at a price per
share of $50. EBIT is expected to remain constant at $21,996. The
interest rate on new debt is 6 percent and there are no taxes.
a. Rebecca owns $20,000 worth of stock in the company. If the
firm has a 100...
Pagemaster Enterprises is considering a change from its current capital structure. The company currently has an...
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 with 35 percent
debt. There are currently 6,500 shares outstanding at a price per
share of $50. EBIT is expected to remain constant at $89,856. The
interest rate on new debt is 6 percent and there are no taxes.
a.
Rebecca owns $10,000 worth of stock in the company. If the firm
has a 100...
Pagemaster Enterprises is considering a change from its current capital structure. The company currently has an...
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 with 25 percent
debt. There are currently 4,500 shares outstanding at a price per
share of $60. EBIT is expected to remain constant at $33,000. The
interest rate on new debt is 7 percent and there are no taxes.
a.
Rebecca owns $18,000 worth of stock in the company. If the firm
has a 100...
Pagemaster Enterprises is considering a change from its current capital structure. The company currently has an...
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 with 40 percent
debt. There are currently 4,350 shares outstanding at a price per
share of $25. EBIT is expected to remain constant at $21,830. The
interest rate on new debt is 6 percent and there are no taxes.
Rebecca owns $29,000 worth of stock in the company. If the firm
has a 100 percent...
Lydic Enterprises is considering a change from its current capital structure. The company currently has an...
Lydic 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 with 20 percent
debt. There are currently 4,080 shares outstanding at a price per
share of $50. EBIT is expected to remain constant at $34,853. The
interest rate on new debt is 5 percent and there are no taxes. a.
Rebecca owns $34,000 worth of stock in the company.
If the firm has a 100...
Lydic Enterprises is considering a change from its current capital structure. The company currently has an...
Lydic 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 with 35 percent
debt. There are currently 6,000 shares outstanding at a price per
share of $90. EBIT is expected to remain constant at $75,000. The
interest rate on new debt is 12 percent and there are no
taxes.
a. Rebecca owns $36,000 worth of stock in the
company. If the firm has a 100...
Erin Enterprises is considering a change from its current capital structure. The company currently has an...
Erin 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 with 30 percent
debt. There are currently 3,600 shares outstanding at a price per
share of $60. EBIT is expected to remain constant at $32,928. The
interest rate on new debt is 6 percent and there are no
taxes.
a. Rebecca owns $18,000 worth of stock in the
company. If the firm has a 100...
Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has...
Beckman Engineering and Associates (BEA) is considering a change
in its capital structure. BEA currently has $20 million in debt
carrying a rate of 7%, and its stock price is $40 per share with 2
million shares outstanding. BEA is a zero growth firm and pays out
all of its earnings as dividends. The firm's EBIT is $12.535
million, and it faces a 30% federal-plus-state tax rate. The market
risk premium is 4%, and the risk-free rate is 6%. BEA...
Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has...
Beckman Engineering and Associates (BEA) is considering a change
in its capital structure. BEA currently has $20 million in debt
carrying a rate of 6%, and its stock price is $40 per share with 2
million shares outstanding. BEA is a zero growth firm and pays out
all of its earnings as dividends. The firm's EBIT is $14.039
million, and it faces a 40% federal-plus-state tax rate. The market
risk premium is 6%, and the risk-free rate is 7%. BEA...
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