Bruno's Is Considering a Change from Its Current Capital Structure

question 47

Multiple Choice

Bruno's is considering a change from its current capital structure.Bruno's currently has an all-equity capital structure and is considering a capital structure with 30 percent debt.There are currently 6,500 shares outstanding at a price per share of $46.EBIT is expected to remain constant at $43,000.The interest rate on new debt is 8.5 percent and there are no taxes.Tracie owns $20,700 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)$1,998
• B)$2,227
• C)$2,815
• D)$3,027
• E)$3,499

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Definitions:

Public Institutions

Organizations established and funded by governments to perform public services or functions, such as education, healthcare, and public safety.

Economic Aims

The goals or objectives that an organization or government seeks to achieve to ensure economic growth, stability, and prosperity.

Social Aims

Objectives that relate to societal challenges or goals, focusing on contributions towards the welfare of communities and the environment.

Profit-Leverage Effect

A financial concept indicating that a reduction in purchasing costs can have a more significant impact on a company's profit than an equivalent increase in sales.