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Capital structures-what is the value of firm under plan
Course:- Financial Management
Reference No.:- EM131354114




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Kyle 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 730,000 shares of stock outstanding. Under Plan II, there would be 480,000 shares of stock outstanding and $7.5 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 of equity. Share Price equals $

What is the value of the firm under Plan I?

What is the value of the firm under Plan II?




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