Rise Against Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 210,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares of stock outstanding and $2.28 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes.
Use M&M Proposition I to find the price per share.
Share price $ per share
What is the value of the firm under each of the two proposed plans?
All equity plan $
Levered plan $