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An unlevered firm has an EBIT = $250,000, aftertax net income = $165,000, and a cost of capital of 12%. A levered firm with the

An unlevered firm has an EBIT = $250,000, aftertax net income = $165,000, and a cost of capital of 12%. A levered firm with the same assets and operations has $1.25 million in face value debt paying an 8% annual coupon; the debt sells for par value in the marketplace. What is the value of the levered firm? The tax rate is 34%.

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