Calculate the value of leverage for Cruise Company and Kidman Company, whose economic balance sheets are shown. Assume the marginal corporate tax rate is 35%, the marginal tax rate on personal income derived from equity is 20%, and the marginal tax rate on personal interest deductions is 39.6%. Assume no costs to financial distress and no operating effects to leverage.

Cruise Company Condensed Economic Balance Sheet December 31, 2001 $ 1,000,000 Debt $ 700,000 300,000 Total Debt and Equity 1,000,000 Assets Equity Kidman Company Condensed Economic Balance Sheet December 31, 2001 Assets $1,000,000 Debt Equity Total Debe and Equiry 1000,000 200,000 800,000 1,000,000 Total Debt and Equiry uity