An unlevered firm has a cost of capital of 16 percent and earnings before interest and

taxes of $225,000. A levered firm with the same operations and assets has both a book value

and a face value of debt of $850,000 with an 8 percent annual coupon. The applicable tax rate

is 34 percent. What is the value of the levered firm

For this question, why the debt is considered as a perpetuity?