Question

Western shores is comparing two separate capital structures. the first structure consists of 260,000 shares of stock and no debt. the second structure consists of 210,000 shares of stock and $1.5 million of debt. what is the price per share of equity

Answer 1

equality

Step-by-step explanation:

Answer 2

Let the price per share of the equity be $ X

Capital structure 1 -

All equity financed, = 260,000 shares * $ X

Capital structure 2 -

Equity + Debt financed = 210,000 shares * $ X + $ 1,500,000

Since, there is a need to compare the two capital structures, thus -

Capital structure 1 = Capital structure 2

260,000 shares * $ X = 210,000 shares * $ X + $ 1,500,000

50,000 X = $ 1,500,000

X = $ 30

Thus, the price of equity = $ 30 per share