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Bruno's is considering changing from its current all-equity capital structure to 30 percent debt. There...

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Accounting

Bruno's is considering changing from its current all-equity capital structure to 30 percent debt. There are currently 7,500 shares outstanding at a price per share of $39. EBIT is expected to remain constant at $23,000. The interest rate on new debt is 7.5 percent and there are no taxes. Tracie owns $12,675 worth of stock in the company. The firm has a 100 percent payout. What would Tracie's cash flow be under the new capital structure assuming that she keeps all her shares?Bruno's is considering changing from its current all-equity capital structure to 30 percent debt. There are currently 7,500 shares
outstanding at a price per share of $39. EBIT is expected to remain constant at $23,000. The interest rate on new debt is 7.5 percent and
there are no taxes. Tracie owns $12,675 worth of stock in the company. The firm has a 100 percent payout. What would Tracie's cash
flow be under the new capital structure assuming that she keeps all her shares?
Hint: All-equity value =7,500$39=$292,500
Shares repurchased =7,500.30=2,250 shares
EPS =[$23,000-($292,500)(.30)(.075)](7,500-2,250)=$3.1274
Cash flow =($3.1274)($12,675$39)=?
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