Alpha Corp. and Beta Corp. are identical in every way except their capital structures. Alpha Corporation, an all-equity firm, has 13,500 shares of stock outstanding, currently worth $25 per share. Beta Corporation uses leverage in its capital structure. The market value of Betas debt is $63,500, and its cost of debt is 7 percent. Each firm is expected to have earnings before interest of $73,500 in perpetuity. Neither firm pays taxes. Assume that every investor can borrow at 7 percent per year. (Do not round intermediate calculations. Omit $ sign in your response.) a. What is the value of Alpha Corporation? Value of Alpha $

b. What is the value of Beta Corporation? Value of Beta $ c. What is the market value of Beta Corporations equity? Market value of Beta's equity $

d. How much will it cost to purchase 20 percent of each firms equity?

	Amount to invest
Alpha	$
Beta	$

e. Assuming each firm meets its earnings estimates, what will be the dollar return to each position in (d) over the next year?

	Dollar return on investment
Alpha	$
Beta	$

f. Not available in Connect. g. Not available in Connect.