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4. Firm A has 10 million shares outstanding and selling for Tk.80 each. It has no debt. Firm Bs perpetual debt has market value of

4. Firm A has 10 million shares outstanding and selling for Tk.80 each. It has no debt. Firm Bs perpetual debt has market value of Tk.275 million and costs eight percent per year. The firm has 4.5 million shares outstanding and currently selling for Tk.125 each. Both the firms A and B are identical in every way except their capital structures and both the firms expect to earn Tk.96 million before interest and taxes per year forever. If the firms pay no taxes, which firms share would be a better buy and explain why?

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