Question

Mary owns a floral and gift shop valued at $150,000. If she keeps the shop open 5 days a week, EBIT is $75,000. If the shop remains open 6 days a week EBIT increases to $92,000 annually. Mary needs an additional $50,000 which she can raise by either selling stock or issuing debt at an interest rate of 7 percent. Ignore taxes. What will the cash flow for the year be to Mary if she issues stock and remains open 6 days a week

Answer 1

Answer:

Check the explanation

Explanation:

If Mary issues stock, she would not be bearing any interest expense for the money she raised. since all the money she raised is through stock. Therefore, Cash flow for the year would be

$69000: [1592,000 *5150,000/ (V50,000+550,000)]

This is the cash flow for the year to be for Mary if she issues stock and remains open 6 days a week