Kolby corp is comparing two different capital structures, Ask an Expert

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Kolby Corp. is comparing two different capital structures. Plan I would result in 7,500 shares of stock and $100,000 in debt. Plan II would result in 6,600 shares of stock and $120,000 in debt. The interest rate on the debt is 6 percent. Assume that EBIT will be $50,000. An all-equity plan would result in 12,000 shares of stock outstanding. Ignore taxes.

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

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92068657

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