Consider two firms. firm A is only equity financed and firm B has half equity half debt. They are on the same risk class with same = 10% and have same EBIT values equal to 100$. Both firms have the same number of shares issued which is 100. And risk free rate is 5%.

a) What is the firm value for A and B?

b) What is the price per share for A and B?

c) What is the EPS for A and B?

d) If the share price of B is 6$, how would you explore the arbitrage opportunity to increase your expected income stream if you have 10 shares of B?