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Key Lime Pie Co. expects EBIT of $150,000 every year forever. Key Lime Pie Co. currently has no debt and its cost of equity is

Key Lime Pie Co. expects EBIT of $150,000 every year forever. Key Lime Pie Co. currently has no debt and its cost of equity is 20%. The firm can borrow at 9%. The corporate tax rate is 28%.

Given that the firm has a value of $540,000 when it is all equity, how can Key Lime Pie Co. maximize the value of the firm? What will be the maximum value if there are no costs to financial distress?

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