Plan A: is an all common equity structure in which $2.3 milliondollars would be

Plan A: is an all common equity structure in which $2.3 milliondollars would be raised by selling common stock @ $10 per sharePlan B: would involve the use of financial leverage. $1.4 milliondollars would be raised by selling bonds w/ an effective interestrate at 10.5% (per annum) and the remaining $0.9 million would beraised by selling the common stock @ $10 per share. The use of thefinancial leverage is considered to be a permanent part of thefirms capitalization so no fixed maturity date is needed for theanalysis. A 30% tax rate is deemed appropriate for thisanalysis.