For this and the next question (Assume earnings growth):

1. Aon Electronics has EBIT of $200,000, a growth rate of 6%, and a corporate tax rate of 40%. In order to support growth, Aon must reinvest 20% of its EBIT in its operating assets. The firm has $300,000 in 8% debt outstanding. A similar company with no debt has a cost of equity of 11% (i.e. rEU = 11%). According to the MM extension with growth, what is the value of Aon's interest tax savings?

a. $87,273

b. $120,000

c. $288,000

d. $192,000

e. $300,000

2. Refer to above. According to the MM extension with growth, what is the unlevered value of the firm? [To help you correctly answer this question, please note that FCF = $80,000]

a. $1,090,909

b. $1,792,000

c. $2,400,000

d. $4,000,000

e. $1,600,000