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Kolby Corp. is comparing two different capital structures. PlanI would result in 12,000 shares of stock and $100,000 in debt. PlanII would result in 7,200 shares of stock and $160,000 in debt. Theinterest rate on the debt is 10 percent. Assume that EBIT will be$90,000. An all-equity plan would result in 20,000 shares of stockoutstanding. Ignore taxes. What is the price per share of equityunder Plan I? Plan II?
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