Question

Gulf Shores Inn is comparing two separate capital structures. The first structure consists of 365,000 shares of stock and no debt. The second structure consists of 330,000 shares of stock and $2.30 million of debt. What is the price per share of equity?

Answer 1

Answer:

share price = 65.71 per share

Explanation:

given data

first structure consists = 365,000 shares

second structure consists = 330,000 shares

debt in the second structure = $2.30 million

solution

we get here difference between shares in first structure to second structure  that is

difference between shares = 365,000 - 330,000

difference between shares = 35,000

so when  $2.30 million of debt we can decrease shares by 35,000

and

share price will be

share price = $\frac{2.30million}{35000}$

share price = 65.71 per share