Question
Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Rolston would have
Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Rolston would have 175,000 shares of stock outstanding. Under Plan II, there would be 110,000 shares of stock outstanding and $2.33 million in debt outstanding. The interest rate on the debt is 6 percent and there are no taxes.
Use MM Proposition I to find the price per share
What is the value of the firm under each of the two proposed plans?
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The New Managed Account Solutions Handbook
Authors: Stephen D. Gresham, Arlen S. Oransky
1st Edition
0470222786, 978-0470222782
