Cooke Co. is comparing two different capital structures. Plan I would result in

Question

Cooke Co. is comparing two different capital structures. Plan I would result in 9,000 shares of stock and $342,000 in debt. Plan II would result in 12,600 shares of stock and $205,200 in debt. The interest rate on the debt is 10 percent. The all-equity plan would result in 18,000 shares of stock outstanding. Ignore taxes for this problem.

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

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

Cooke Co. is comparing two different capital structures. Plan I would result in 9,000 shares of stock and $342,000 in debt. Plan II would result in 12,600 shares of stock and $205,200 in debt. The interest rate on the debt is 10 percent. The all-equity plan would result in 18,000 shares of stock outstanding. Ignore taxes for this problem.

Explanation / Answer

Cooke Co. is comparing two different capital structures. Plan I would result in

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