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Foundation, Incorporated, 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, Incorporated, 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 200,000 shares of stock outstanding. Under Plan II, there would be 115,000 shares of stock outstanding and $1.75 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes. a. Use M\&M Proposition I to find the price per share. (Do not round Intermedlate calculetlons and round your answer to 2 declmel pleces, e.9., 32.16.) b. What is the value of the firm under each of the two proposed plans? (Do not round Intermedlate colculatlons and round your answers to the neerest whole dollar amount, e.g., 32.)
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