King and Queen are identical firms except for their capital structure. Queen has debt that carries a 5% interest rate and whose market value is 1 million NIS. The forecasted financial data of the companies are presented below: All cash flows are forever and there are no taxes. Financial item King Queen Operating income (EBIT) 500,000 NIS 500,000 NIS Interest payment 50,000 NIS Market value of equity 4 million NIS 2.6 million NIS Market value of debt 1 million NIS A. (5 points) An investor wants to buy 5% of one of the companies. What is the annual cash flow and return on equity under each option? B. (10 points) Explain and show complete numerical solution of how an investor can generate arbitrage profits from buying or selling 5% of the share capital of King. Assume that the investor can borrow at the 5% interest rate. C. (5 points) Assume that following the trading activity of sophisticated investors, the market reached an equilibrium when the value of a King company is 3.8 million NIS. What is the market value of Queens's equity