Question
Byrd Corp is comparing two different capital structures, and all equity plan (Plan I) and a levered plan(Plan II). Under Plan I, the company would
Byrd Corp is comparing two different capital structures, and all equity plan (Plan I) and a levered plan(Plan II). Under Plan I, the company would have 175,000 shares of stock outstanding. Under Plan II, there would be 125,000 shares of stock outstanding and 2.23 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes.
a. USE MM Proposition I to find price per share.
b, What is the value of the firm under each of the two proposed plans?
a Share Price
| a | Share Price |
|
| b | All Equity Plan |
|
|
| Levered Plan |
|
b All Equity Plan Levered Plan
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Personal Finance
Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes
11th edition
9781259278617, 77861647, 1259278611, 978-0077861643
