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Foundation, Inc., is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would
Foundation, Inc., 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 145,000 shares of stock outstanding. Under Plan II, there would be 125,000 shares of stock outstanding and $716,000 in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. Use M\&M Proposition I to find the price per share of equity under each of the two proposed plans. What is the value of the firm
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