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: How much of the special dividend do you receive, and how much do you receive in regular dividends per annum after the restructuring?
A) $15, $60
B) $60, $15
C) $10.80, $22.50
D) $22.50, $10.80
Correct Answer:
Verified
Q31: Borrowing money and paying out a special
Q36: A financial restructuring:
A) will not change the
Q37: A company's enterprise value is given by:
A)
Q38: M&M Proposition 1 assumes all of the
Q39: The weighted average cost of capital (WACC)
Q42: Dynamo Company produces annual cash flows of
Q43: Dynamo Company produces annual cash flows of
Q44: The use of debt financing:
A) may cause
Q45: Dynamo Company produces annual cash flows of
Q46: In order to calculate the present value
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