Air Taxi, Inc. and Wing Air Inc. are identical in every way, except that Wing Air is a more levered firm. Both companies expect to remain in business for one more year. Here are the economist projections for the next year: What is the value of each firm's debt and equity? Solution template: Probability of expansion 75% a. Air Taxi, Inc. Probability of recession 25% Equity payment Expansion EBIT $3,700,000 Expansion $ Recession EBIT $2,100,000 Recession $ Air Taxi debt payment $850,000 Wing Air debt payment $1,300,000 Equity value $ Annual discount rate 0 Debt payment: Expansion $ Recession $ Wing Air, Inc. Equity payment Expansion $ Recession $ Equity value $ Debt payment: Expansion $ Recession $ Debt value $ b. V(Air Taxi, Inc.) $ V(Wing Air, Inc.) $