Cede & Co. expects its EBIT to be $102,000 every year forever. The company can borrow at 6 percent. The company currently has no debt and its cost of equity is 12 percent.

1) If the tax rate is 21 percent, what is the value of the company?

2) What will the value be if the company borrows $185,000 and uses the proceeds to repurchase shares? Still assume a tax rate of 21%.