Bruno's Is Considering Changing from Its Current All-Equity Capital Structure

question 12

Multiple Choice

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 of her shares?

• A)$998
• B)$1,109
• C)$1,115
• D)$1,037
• E)$1,016

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Definitions:

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