Question: Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have

Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 720,000 shares of stock outstanding. Under Plan II, there would be 470,000 shares of stock outstanding and $7 million in debt outstanding. The interest rate on the debt is 10 percent, and there are no taxes.

Requirement 1:

Use M&M Proposition I to find the price per share of equity.

Share price

Requirement 2:

What is the value of the firm under Plan I? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Value of the firm

Requirement 3:

What is the value of the firm under Plan II? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Value of the firm

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