Conspicuous Consumption, Inc., a prominent consumer products
firm, 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. Ms. Brown, a shareholder of the firm, owns 250 shares
of stock. What is her cash...