Dynamo Corp

question 56

Multiple Choice

Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 percent equity and 25 percent debt. Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock. If Dynamo wishes to change its capital structure from 75 percent to 60 percent equity, how much of the special dividend do you receive, and how much do you receive in regular dividends per year after the restructuring according to M&M Proposition 1?

• A) $15 and $60
• B) $60 and $15
• C) $10.80 and $22.50
• D) $22.50 and $10.80

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Definitions:

Neurotransmitter

Chemical substances that transmit nerve impulses across a synapse from one nerve cell to another.

Latency Stage

In Freud’s psychoanalytic theory, the fourth stage of psychosexual development, characterized by repression of sexual impulses and development of skills.

Freud's Stage

Stages of psychological development theorized by Freud, emphasizing sexual and aggressive urges shaping personality.

Monozygotic

Pertaining to twins that developed from a single fertilized ovum, making them genetically identical.