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

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

Answer Link

sohail09753 sohail09753 · Answer 2 · 2021-12-31T12:28:30+01:00

The final cash flow to Mart of she issues stock for 6 days a week open will be $67,880.

The cash flow is the net amount left with Mary after the payment of all the interest expense. it is the amount over which the percentage of tax is charged.

Computation:

Given,

[tex]EBIT[/tex] The earning before interest and tax is $75,000.

The rate of interest is 7%

The additional issue of amount is $50,000

[tex]\begin{aligned}\text{Cash Flow}&=EBIT-\text{Interest Expense}\\&=\$75,000-\$7,120\\&=\$67,880\end{aligned}[/tex]

Thus, the cash flow is $67,880.

To know more about cash flow, refer to the link:

https://brainly.com/question/5339442