In a M-M world without taxes, an unlevered firm is worth $700 and a levered firm with 50% debt is worth $800. Both firms have an income of $80 and the risk-free rate is 4%. Show that an arbitrage opportunity exits. b) If the correct value of the firm (in a M-M world without taxes and other frictions) is $800, and a corporate tax of 20% is imposed, what is the new value of the levered and unlevered firms (the levered firm will now have $400 of debt)? What is the value of equity in the levered firm?