3. The Blalock Corporation has a $1 million capital structure and will always maintain this book-value amount. Blalock currently earns $250,000 per year before taxes of 50 percent, has an all-equity capital structure of 100,000 shares, and pays all earnings in dividends. The company is considering issuing debt in order to retire stock. The cost of the debt and the price of the stock at various levels of debt are given in the accompanying table. It is assumed that the new capital structure would be reached all at once by purchasing stock at the current price. In other words, the table is a schedule at a point in time.

Average Cost Price of Stock Amount of Debt of Debt per Share