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Coca Cola is comparing two different capital structures. Given that Plan 1 all equity plan would result in 25,000 shares of stock outstanding at
Coca Cola is comparing two different capital structures. Given that Plan 1 all equity plan would result in 25,000 shares of stock outstanding at a market price of $13.5 per share. Plan 2 has 16,000 shares of stock and $200,000 in debt. The Coca Cola has to pay 12% in debt and tax 24%. a. Compare Plan 1 and Plan 2 with all equity plans, one is higher? b. What are the break even points of EBIT for each plan as compared to that for an all-equity plan? c. Calculate the unlevered cost of capital if the company has issued $150,000 worth of debt and used the funds to repurchase shares of the outstanding stock (the firm's equity cost of capital is 13.5%) d. The firm's equity cost of capital in part (c) if the corporate tax rate is 24% that EBIT will be $75,000. Which
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