Sampras, Inc. is considering to convert its all-equity capital structure to one that is 40 percent debt. Currently, there are 1,000 shares outstanding and the price per share is $70. EBIT is expected to remain at $7,000 per year forever. The interest rate on new debt is 7 percent, and there are no taxes. Investor, a shareholder of the firm, owns 100 shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent

Pear co.’s income statement for the year ended december 31, as prepared by pear’s controller, reported income before taxes of $125,000. the auditor questioned the following amounts that had been included in income before taxes: equity in earnings of cinn co. $ 40,000 dividends received from cinn 8,000 adjustments to profits of prior years for arithmetical errors in depreciation (35,000) pear owns 40% of cinn’s common stock, and no acquisition differentials are relevant. pear’s december 31 income statement should report income before taxes of