Dynamo Company Produces Annual Cash Flows of $150 and Is

question 47

Multiple Choice

Dynamo Company produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 per cent equity and 25 per cent debt. Your analysis tells you that the appropriate discount rates are 10 per cent for the cash flows, and 7 per cent for the debt. You currently own 10 per cent of the shares. M&M Proposition 1: What are the interest payments that you receive after you undo the restructuring, and what are your total cash flows?

• A) $1.57, $12.38
• B) $23.55, $75
• C) $1.13, $12.38
• D) $1.24, $11.25

---

Definitions:

Micelle Formation

The self-assembly of amphiphilic molecules into spherical structures in aqueous solutions, important for the absorption of fat-soluble vitamins and lipids.

Lipids

A diverse group of naturally occurring molecules that include fats, oils, waxes, and certain vitamins, serving as energy storage and important cell membrane components.

Monosaccharides

Simple sugars that serve as the most basic form of carbohydrates, such as glucose and fructose.

Symport Process

A type of active transport in which two substances are simultaneously transported across a cell membrane in the same direction by a transporter protein.