Question
Byrd Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would
| Byrd Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 365,000 shares of stock outstanding. Under Plan II, there would be 245,000 shares of stock outstanding and $4.56 million in debt outstanding. The interest rate on the debt is 10 percent and there are no taxes. |
| a. | Use MM Proposition I to find the price per share. |
| b. | What is the value of the firm under each of the two proposed plans? |
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Financial Institutions Management A Risk Management Approach
Authors: Anthony Saunders, Marcia Cornett
7th Edition
0073530751, 9780073530758
