Question: 21. Round Hammer is comparing two different capital structures: An all-equity plan (Plan 1) and a levered plan Plan 11). Under Plan I, the company

21. Round Hammer is comparing two different capital structures: An all-equity plan (Plan 1) and a levered plan Plan 11). Under Plan I, the company would have 195,000 shares of stock outstanding, Under Plan 11, there would be 120.000 shares of stock outstanding and $2,35 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes. (25 points) a) Use M&M Proposition to find the price per share 195,000 - 120000 = 75,000 b) What is the value of the firm under each of the two proposed plans

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