5AAbe Forrester and three of his friends from college haveinterested a group of

5AAbe Forrester and three of his friends from college haveinterested a group of venture capitalists in backing their businessidea. The proposed operation would consist of a series of retailoutlets to distribute and service a full line of vacuum cleanersand accessories. These stores would be located in Dallas Houstonand San Antonio. To finance the new venture two plans have beenproposed: Plan A is an all-common-equity structure in which $2.3 milliondollars would be raised be selling 86000 shares of commonstock. Plan B would involve issuing $1.3 million dollars in long-termbonds with an effective interest rate of 11.5% plus $1.0 millionwould be raised by selling 43000 shares of common stock. The debtfunds raised under Plan B have no fixed maturity date in that thisamount of financial leverage is considered a permanent part of thefirms capital structure.