Three recent graduates of the computer science program at the University of Tennessee are forming a company that will write and distribute new application software for the iPhone.$$ Initially, the corporation will operate in the southern region of$$ Tennessee, Georgia, North$$ Carolina, and South Carolina. A small group of private investors in the$$ Atlanta, Georgia area is interested in financing the startup$$ company, and two financing plans have been put forth for$$ consideration:

bullet Plan A is an$$ all$-$common$-$equity capital structure in which $$$$2\mathrm{.}2$ million would be raised by selling common stock at $$$$20$ per common share.

bullet Plan B involves the use of financial$$ leverage, with $$$$1\mathrm{.}5$ million raised by selling bonds with an effective interest rate of $11\mathrm{.}4$ percent$($per annum$),$ and the remaining $$$$0\mathrm{.}7$ million raised by selling common stock at $$$$20$ per share. The use of financial leverage is a permanent part of the$$ firm's capitalization, so no fixed maturity date is needed for the analysis. Use a $21$ percent tax rate in your analysis.