Consider two companies A and B both with EBIT $200 billion each. Both companies have total capitalization $1,000 billion each. The flat tax rate is 25%, the interest rate on debt is 6% and the required rate of return by investors is 10%. Company A is financed by equity 100%, while company B has a capital structure 50% debt and 50% equity. Then the total value is:

		higher for A because the company has no debt
		for A is $158 billion and for B is $150 billion respectively
		for A is $150 billion and for B is $158 billion respectively
		for A is $150 billion and for B is $188 billion respectively