Staal enterprises is considering a change from its current, Ask an Expert

Finance

Staal Enterprises is considering a change from its current capital structure. Staal currently has an all-equity capital structure and is considering a capital structure with 35% debt. There are currently 6500 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% and there are no taxes.

Required:

(a) Rebecca owns $10,000 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-what number of shares should she sell?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91875760

Have any Question?Write your Review or question?

Related Questions in Basic Finance

With auto loans it is common for buyers to trade in their

With auto loans, it is common for buyers to trade in their cars after the outstanding principal on the car loan exceeds the re-sale value of the used car. After which loan payment will it be profitable for you to trade-i ...

Corporate finance questionan investment pays you 30000 at

Corporate Finance Question: An investment pays you $30,000 at the end of this year, and $10,000 at the end of each of the four following years. What is the present value (PV) of this investment, given that the interest r ...

1 what criteria would you use to evaluate projects in terms

1. What criteria would you use to evaluate projects in terms of selection? 2. What factors are important to included in project plans to ensure effective planning and management?

How much of the opposing side should you share in a

How much of the opposing side should you share in a presentation to a multiple-perspective audience, and what techniques would you use?

A study finds that the prices of stocks prior to large

A study finds that the prices of stocks prior to large dividend increases show on average consistently positive abnormal returns. Is this a violation of the efficient market hypothesis? Explain.

Suppose that a mutual fund that tracks the sampp has mean

Suppose that a mutual fund that tracks the S&P has mean E(Rm) = 16% and standard deviation σm = 10%, and suppose that the T-bill rate Rf = 8%. Answer the following questions: (a) What is the expected return and standard ...

Consider the following scenario analysisrate of

Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.20 -4% 16% Normal economy 0.50 18 9 Boom 0.30 29 6 a. Is it reasonable to assume that Treasury bonds will provid ...

What is marketing discipline what is most peoples

What is marketing discipline? What is most people's perception of marketing discipline? Name an organization that has done a great job marketing. What did they do to make you feel this way?

What is the difference between risk and uncertainty and

What is the difference between risk and uncertainty and what are the methods of risk management?

Magenta corporation wants to raise 508 million in a

Magenta corporation wants to raise 50.8 million in a seasoned equity offering, net of all fees. Magenta stock currently sells for $14 per share. The underwriters will require a spread of $.50 per share, and indicate that ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert