Question: Division Corporation is comparing two different capital structures. Plan I would result in 3 3 , 0 0 0 shares of stock and $ 9

Division Corporation is comparing two different capital structures. Plan I would result in 33,000 shares of stock and $96,000 in debt. Plan II would result in 27,000 shares of stock and $288,000 in debt. The interest rate on the debt is 5 percent. Assume that EBIT will be $130,000. An all-equity plan would result in 36,000 shares of stock outstanding. Ignore taxes. What is the price per share of equity under Plan I? Plan II?

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