(a) Two firms B and S are identical in all respects except the degree of leverage. Firm B has K2,500,000 debt on which it pays 8% interest while firm S has no debt. Both the firms are earning an EBIT of K500,000. The equity capitalisation rate is 12% and the corporate tax is 60%. You are required to compute the market value of the two firms. % (6 marks) equ+ (au) (b) If you own 5% of Firm B's stock, show what arbitrage you would resort to. (8 marks)