Melvin Clark, CFO of Matsushita Corp, is evaluating the value of the firm's current capital structure. Being conservative, he expects Matsushita will have a perpetual EBIT (Earnings before interest and taxes) of $800,000. Investor's discount after-tax earnings at a rate of 10% if the firm is all equity financed. Currently the firm has $1.2 million in debt. The corporate tax rate is 35% and personal taxes on income, dividends, and capital gains are 0. The combined financial distress and agency costs associated with the debt are approximately 5 percent of total debt value.

How much more is Matsushita worth with the debt as compared to without any debt?

Question 10 options:

	$410,000
	$500,000
	$420,000
	$460,000