TJim Wilson is considering the possibility of opening his own machine shop. He expects first-year sales to be $600,000 and he feels that his variable costs will be approximately 50% of sales. Jim is considering two ways of financing the firm's $800,000 in assets: Plan A 60% equity financing and 40% debt financing, debt costing 14%. Plan B 100% equity financing. Jim can sell common stock to his relatives for $10 per share. The financing structure of the two alternatives can be described as follows: Plan A is leveraged because it has more debt than Plan B which is conservative Plan A is conservative because it has more debt than Plan B which is leveraged Plan A is leveraged because it will offer "cheaper" financing than Plan B None of the above Mark 1 out of 1 The correct answer is: Plan A is leveraged because it has more debt than Plan B which is conservative For Plan A, the annual interest expense will be $44,800 $32,000 $48,000 $67,200 What number of shares would be outstanding for each plan? Plan A 48,000 shares Plan B 80,000 shares Plan A 480,000 shares Plan B 800,000 shares Plan A 800,000 shares Plan B 800,000 shares X Plan A 48,000 shares Plan B 48,000 shares Mark 0 out of 1 The correct answer is: Plan A 48,000 shares Plan B 80,000 shares