Question: Leverage and Share Value ABC plc is comparing two different capital structures. Plan I would result in 1,100 shares of stock and 16,500 in debt.

Leverage and Share Value

ABC plc is comparing two different capital structures. Plan I would result in 1,100 shares of stock and 16,500 in debt. Plan II would result in 900 shares of stock and 27,500 in debt, on which it would pay interest of 8 per cent. What is the price per share of equity under Plan I? Plan II? What principle is illustrated by your answers ?

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