a. Referring to Table 13.3, calculate the market value of firm L (with a corporate income tax) if the equity amount in its capital structure decreases to $3,000 and the debt amount increases to $3,000.
b. For firm L (with equity = $3,000 and debt = $3,000), calculate (i) the income available to the stockholders and (ii) the cost ofequity.

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Table 13.3 Capital Structure with a Corporate Income Tax: Financial Data on Firms U and L Firm U $1,000 Net operating income (EBIT) Less: Interest payments to debt holders, I Income before taxes Less: Corporate taxes (7-40%) Income available to stockholders (dividends), D Total income available to security holders (+D) Required rate of return on debt, kd Market value of debt, (B lkd) Required rate of return on equity. k Market value of equity. (E Dike Market value of firm, (E B) Firm L $1.000 100 $900 400 360 $ 540 600 640 5% $2.000 1 1 .25% $4.800 $6,800 $1,000 600 10% $6,000 $6,000