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Nata [24]
3 years ago
11

Round Hammer is comparing two different capital structures: An all-equity plan (Plan l) and a levered plan (Plan Il). Under Plan

I, the company would have 205,000 shares of stock outstanding. Under Plan II, there would be 125,000 shares of stock outstanding and $1.73 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes. a. Use M&M 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.) b. What is the value of the firm under each of the two proposed plans?
Business
1 answer:
Dominik [7]3 years ago
6 0

Explanation:

A). The computation of price per share is shown below:-

Debt outstanding ÷ (Stock outstanding of Plan 1 - Stock outstanding of

Plan 2)

= $1,730,000 ÷ (205,000 - 125,000)

= $21.63 per share

B a.) Under equity plan the value is

= Debt outstanding × Stock outstanding of Plan 1

= $21.63 × 205,000 shares

= $4,433,125

B b.) under the levered plan the value is

Price per share × Stock outstanding of Plan 2 + Debt outstanding

= $21.63 × 125,000 shares + $1,730,000

= $2,703,125 + $1,730,000

= $4,433,125

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2 years ago
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alina1380 [7]
Answer:

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3 years ago
Next Up Computer Company thinks it will make a splash with cartoon-themed laptop cover designs scheduled for release next year.
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Considering the situation described above, this effort is an example of using <u>image differentiation</u> to differentiate a product as new.

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By using communication strategies such as written, audio, digital, advertisement, or images to differentiate between various products or from existing products, this is an example of <u>image differentiation</u>.

Thus, when Next Up Computers only changes the cover designs alone, that is a form of <u>image differentiation</u>.

This is type of differentiation is often referred to as Reputation Differentiation.

Other types of differentiation methods include the following:

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3 years ago
  Kameela says that a good choice of wine to pair with cheese is a Zinfandel. Annette says that a better choice to pair with che
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3 years ago
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Vijay Inc. purchased a three-acre tract of land for a building site for $350,000. On the land was a building with an appraised v
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2 years ago
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