Bruce & Co. has expected EBIT of $85,000 per year. The firm can borrow at 12 percent. Bruce currently has no debt, and its cost of equity is 22 percent. The tax rate is 32 percent and interest is tax deductible. Except for taxes, assume that markets are perfect (no bankruptcy, etc.).

Required

a) What is the value of the firm? (Do not round intermediate calculations)

b) What will the value of the firm be if Bruce borrows $52,000 and uses the proceeds to repurchase shares of equity? (Do not round intermediate calculations)