Plan A: is an all common equity structure in which $2.1 milliondollars would be

Plan A: is an all common equity structure in which $2.1 milliondollars would be raised by selling common stock @ $20 per sharePlan B: would involve the use of financial leverage. $1.4 milliondollars would be raised by selling bonds w/ an effective interestrate at 10.7% (per annum) and the remaining would be raised byselling the common stock @ $20 per share. The use of the financialleverage is considered to be a permanent part of the firmscapitalization so no fixed maturity date is needed for theanalysis. A 30% tax rate is deemed appropriate for thisanalysis.