Question: Kolby Corp. is comparing two different capital structures. Plan I would result in 12,000 shares of stock and $100,000 in debt. Plan II would result

Kolby Corp. is comparing two different capital structures. Plan I would result in 12,000 shares of stock and $100,000 in debt. Plan II would result in 8,700 shares of stock and $155,000 in debt. The interest rate on the debt is 5 percent. Assume that EBIT will be $80,000. An all-equity plan would result in 18,000 shares of stock outstanding. Ignore taxes.

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

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