1. Prove Case II of Modigliani-Miller Proposition I. Suppose that two firms have identical assets that generate a perpetual cash flow of F per year. The unlevered firm is all equity financed and has a value Vu. The levered firm is financed by debt and equity and has a value VL. The debt pays a perpetual coupon of C per year. The interest rate is r, and both companies as well as individual investors can borrow or lend at the risk free rate. If Vu > Vi, describe an arbitrage opportunity. That is, describe how to generate a risk free cash flow today with zero net cash flow in the future. 1. Prove Case II of Modigliani-Miller Proposition I. Suppose that two firms have identical assets that generate a perpetual cash flow of F per year. The unlevered firm is all equity financed and has a value Vu. The levered firm is financed by debt and equity and has a value VL. The debt pays a perpetual coupon of C per year. The interest rate is r, and both companies as well as individual investors can borrow or lend at the risk free rate. If Vu > Vi, describe an arbitrage opportunity. That is, describe how to generate a risk free cash flow today with zero net cash flow in the future