Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 400,000 shares of stock outstanding. Under Plan II, there would be 260,000 shares of stock outstanding and $6,020,000 in debt outstanding. The interest rate on the debt is 10 percent, and there are no taxes.

1. Use M&M Proposition I to find the price per share of equity.

2.What is the value of the firm under Plan I?

3.What is the value of the firm under Plan II?