Company does convert to new capital structure

Assignment Help Financial Management
Reference no: EM132074104

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 percent payout, what is her cash flow? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Shareholder cash flow $ 5808.83

b. What would her cash flow be under the new capital structure assuming that she keeps all of her shares? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Shareholder cash flow $

c. Suppose the company does convert to the new capital structure. Show how Rebecca can maintain her current cash flow. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Number of shares stockholder should sell

Reference no: EM132074104

Questions Cloud

Describe a price discrimination opportunity : Describe a price discrimination opportunity your chosen company faces or practices - direct, indirect, or bundling
Explain the law of diminishing marginal productivity : Explain the law of diminishing marginal productivity and why the law tends to hold in the short run.
What is the additional annual sales : If the restaurant wants to add 7000 per year in fixed costs, what is the additional annual sales they need to have to cover the new cost
Define the principles of servant leadership in detail : Provide a summary of how the organization implements the principles of servant leadership in the way it interacts with or provide service to customers.
Company does convert to new capital structure : If the firm has a 100 percent payout, what is her cash flow? Suppose the company does convert to the new capital structure.
How would you justify implementing wsus on a computer : How would you justify implementing WSUS on a computer? What benefits does WSUS have? How do you put WSUS on a computer?
Mature manufacturing firm : Antiques R Us is a mature manufacturing firm. If you require an 12 percent return on this stock, what will you pay for share today?
Why might you want to choose one over the other : Suppose that you have an option to host your company's website in the cloud on a server running Linux or on a server running Windows.
What are the best practices for making such a decision : How do companies decide when it is time for new leadership and what are the best practices for making such a decision? Should be 9-10 pages.

Reviews

Write a Review

 

Financial Management Questions & Answers

  Still have enough to grow to be dollar

Willy wants to have dollar 7,000 available after four year to pay down for a new car. His Uncle Wally gave him dollar 15,000 from the sale of the old family farm now. If Wally wants to buy a new home entertainment center now and earns 2.9% per year, ..

  Marr would the company be indifferent between two options

A technology company is planning on introducing a new fitness watch to the market. At what MARR would the company be indifferent between the two options?

  What is the annual operating cash flow for this project

The applicable tax rate is 34 percent. What is the annual operating cash flow for this project?

  Used break-even point analysis

Give an example from your own experience where you used a break-even point analysis. What parameters were necessary to find the break-even point? Please include your break-even calculations based on the equation from page 8 in the textbook

  What is the convexity of the note

What is the quoted price of the note. What is the convexity of the note?

  Debenture bonds are less risky based on debt-to-equity ratio

Which company's debenture bonds are less risky based on the debt-to-equity ratio?

  Certificate of deposit

Let's say Misty Shadle deposits $310,500 dollars in a CD (Certificate of Deposit) at Star Bank. The bank is offering to pay 4.05% interest for 6 years. What will be the balance in Misty's account six years from today. (NOTE; compounded weekly, 52 tim..

  The single index model holds

Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds.

  What will be new portfolio beta

You have a portfolio with a beta of 1.78. What will be the new portfolio beta if you keep 91 percent of your money in the old portfolio and 9 percent in a stock with a beta of 0.71?

  Calculation is based on an annual effective interest rate

Sydney wins a prize. She has a choice of receiving a payment of $160,000 immediately or of receiving a deferred perpetuity with $10,000 annual payments, the first payment occurring in exactly four years. Which has a greater present value if the calcu..

  What is its self-supporting growth rate

How large a sales increase can the company achieve without having to raise funds externally; that is, what is its self-supporting growth rate?

  Determine the return on a portfolio that was equally invest

Determine the return on a portfolio that was equally invested in large-company stocks and long-term corporate bonds.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd