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Problem 1 6 - 5 M and M and Stock Value [ LO 1 ] Foundation, Incorporated, is comparing two different capital structures: an all
Problem M and M and Stock Value LO
Foundation, Incorporated, is comparing two different capital structures: an allequity plan
Plan I and a levered plan Plan II Under Plan I, the company would have
shares of stock outstanding. Under Plan II there would be shares of stock
outstanding and $ million in debt outstanding. The interest rate on the debt is
percent and there are no taxes.
a Use M&M Proposition I to find the price per share. Do not round Intermedlate
calculatlons and round your answer to decimal places, eg
b What is the value of the firm under each of the two proposed plans? Do not round
Intermedlate calculations and round your answers to the nearest whole dollar
amount, eg
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