James Corporation is comparing two different capital structures, an all-equity p

Question

James Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 160,500 shares of stock outstanding. Under Plan II, there would be 64,200 shares of stock outstanding and $1.498 million in debt outstanding. The interest rate on the debt is 10 percent and there are no taxes.

Using M&M Proposition I, the price per share of equity under each of the two proposed plans is $_______ . The value of the firm is $______ under Plan I, and $_____ under Plan II

Please Show how you find your answers

Explanation / Answer

1,498,000/64200 =$23.33 price per share of equity

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

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