Rise Against Corporation is comparing two different capital structures, an all-e

Question

Rise Against Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan Il). Under Plan I, the company would have 195,000 shares of stock outstanding. Under Plan II, there would be 145,000 shares of stock outstanding and $2.13 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes. Use M&M; Proposition I to find the price per share. (Round your answer to 2 decimal places. (e.g., 32.16) Share price per share What is the value of the firm under each of the two proposed plans? (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. (e.g., 32)) All equity plan Levered plan

Explanation / Answer

Share Price Per Share $ 6.77

All equity Plan $ 11.80

Levered Plan $ 15.86

Debt Outstanding Total $ 2130000.00

Interest @ 8% 170400.00

Total Outstanding (2130000.00+170400.00) =2300400

2300400/195000 =$11.78

2300400/145000 = $15.86

Share Price = $ (2300400/ 195000+145000) 6.77

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.