Multiple Choice Question to Answer

Question Please answer the following multiple choice question. Please provide how you got to the answer: 1) Lindbergh Company has the following date related to its capital structure: CASE A CASE B EBIT (in perpetuity): $175000 EBIT (in perpetuity): $175000 Rate on debt: 6.0 % Rate on debt: 6.0 % Cost of Equity: 10.0% Cost of Equity: 10.0% Tax Rate: 35.0% Tax Rate: 35.0% Debt: 0 Debt: Borrow $135000 to buy share Will have debt in perpetuity What is the value of unlevered firm (Case A) and the levered firm (Case B) a) Vu = 1137500 Vl = 1184750 b) Vu = 1137500 Vl = 1145600 c) Vu = 1750000 Vl = 1184750

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