Question
In: Finance
Bellwood Corp. is comparing two different capital structures. Plan I would result in 34,000 shares of...
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Bellwood Corp. is comparing two different capital structures. Plan I would result in 34,000 shares of stock and $97,500 in debt. Plan II would result in 28,000 shares of stock and $292,500 in debt. The interest rate on the debt is 6 percent. Assume that EBIT will be $135,000. An all-equity plan would result in 37,000 shares of stock outstanding. Ignore taxes. |
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What is the price per share of equity under Plan I? Plan II? |
Solutions
Expert Solution
Solution :
The price per share of equity is as follows :
Plan I = $ 3.80
Plan II = $ 4.19
All Equity Plan = $ 3.65
Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.
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