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solution

Franklin 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 205,000 shares of stock
outstanding. Under Plan II, there would be 155,000 shares of stock
outstanding and $2.17 million in debt outstanding. The interest
rate on the debt is 6 percent and there are no taxes. Use

1)

Use MM Proposition I to find the price per
share. (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)

Share price $

2)

What is the value of the firm under each of the two proposed
plans? (Enter your answers in dollars, not millions of
dollars, e.g., 1,234,567. Do not round intermediate calculations
and round your answers to the nearest whole number, e.g.,
32.
)

All equity plan $
Levered plan $

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