Question: Foundation Corporation is comparing two different capital structures, an all - equity plan ( Plan I ) and a levered plan ( Plan II )

Foundation 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 160,000
shares of stock outstanding. Under Plan II, there would be 110,000 shares of stock
outstanding and $1.41 million in debt outstanding. The interest rate on the debt is 7
percent and there are no taxes.
a. Use MM Proposition I to find the price per share. (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,32.16.)
b. What is the value of the firm under each of the two proposed plans? (Do not round
intermediate calculations and enter your answers in dollars, not millions of dollars,
rounded to the nearest whole number, e.g.,1,234,567.)
a. Share price
b. All-equity plan
b. Levered plan
Foundation Corporation is comparing two different capital structures, an all-equity plan

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