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Banana Airways. has an expected EBIT of $1,515,000 in perpetuity and tax rate of 25%.TheBananas Air management is paying 6.25% interest for $6,666,000 outstanding bond.

Banana Airways. has an expected EBIT of $1,515,000 in perpetuity and tax rate of 25%.TheBananas Air management is paying 6.25% interest for $6,666,000 outstanding bond. Assuming unlevered cost of capital (Ru) is 9.19%. a. Evaluate the firm using Modigliani and Miller approach (Case (II), Proposition (I)with taxes)? (4 marks) b. Find the equity value and D/E ratio? (4 marks)

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