Explore BrainMass
Share

# Ozone Depletion Inc and Capital Structure

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Ozone Depletion, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Currently, there are 800 shares outstanding and the price per share is \$80. EBIT is expected to remain at \$6,000 per year forever. The interest rate on new debt is 9 percent, and there are no taxes.

a. Rico, a shareholder of the firm, owns 100 shares of stock. What is his cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent?

b. What will Rico's cash flow be under the proposed capital structure of the firm? Assume that he keeps all 100 of his shares.

c. Suppose Ozone does convert, but Rico prefers the current all-equity capital structure. Show how he could unlever his shares of stock to recreate the original capital structure.

d. Using your answers to part (c), explain why Ozone's choice of capital structure is irrelevant.

© BrainMass Inc. brainmass.com October 24, 2018, 7:05 pm ad1c9bdddf

#### Solution Preview

Please find the solution attached.

The answer to part D is ...

#### Solution Summary

The solution in Excel shows all the calculations to arrive at the answers.

\$2.19

## Sample Outlinea) The Fundamental Causes of Global Warming? Combustion to fossil fuel in cars ? Home appliances contribute to global warming. ? Excessive amounts of carbon dioxide is released per year in Canada and the United States.

What would be a good three level outline for an article on Global warming to be presented to Congress on the subject of whether or not it is fact or fiction.

I need to write a paper on this but there is so much info I feel I have reached over load and got stuck. Could you please provide me with references for thBelow I have attached two PDF files for references I researched as well as a reference list and a sample outline.

Sample Outline

a) The Fundamental Causes of Global Warming

? Combustion to fossil fuel in cars
? Home appliances contribute to global warming.
? Excessive amounts of carbon dioxide is released per year in Canada and the United States.

b) Adverse Impact of Climate Changes

? Rare cold climate species are becoming extinct.
? Glaciers are retreating.
? Sea levels are rising.
? Extreme heat during the summer months.
? Ozone Layer depletion
? Changes in water, air and food quality and quantity.
? Less extreme cold during the winter.
? Climate-sensitive diseases.
? Respiratory disorders may be exacerbated by warming induced increases in the frequency of the smog.
is paper as well as an example of an outline to follow?

View Full Posting Details