Question
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 160,000 shares of stock outstanding. Under Plan II, there would be 110,000 shares of stock outstanding and $1.41 million in debt outstanding. The interest rate on the debt is 7 percent, and there are no taxes.
Use M&M Proposition I to find the price per share.
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
What is the value of the firm under each of the two proposed plans?
Note: Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.
dont need earnings
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