Question: Dickson Corporation is comparing two different capital structures. Plan I would result in 30,000 shares of stock and $91,500 in debt. Plan II would result

Dickson Corporation is comparing two different capital structures. Plan I would result in 30,000 shares of stock and $91,500 in debt. Plan II would result in 24,000 shares of stock and $274,500 in debt. The interest rate on the debt is 6 percent. Assume that EBIT will be $115,000. An all-equity plan would result in 33,000 shares of stock outstanding. Ignore taxes.

What is the price per share of equity under Plan I? Plan II?

NOTE: THE ANSWERS ARE NOT $3.65 and $4.11

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