Miless Manor, an unassuming resort in midstate Pennsylvania, currently has an all equity capital structure. Miless Manor has an expected income of $10,000 per year forever and a required rate of return to equity of 16%. There are no personal taxes, but Miless pays corporate taxes at the rate of 35%, and all transactions take place in an otherwise perfect capital market.

A.) What is Mile's Manor worth?

B.) How much will the value of the firm increase if Mile's Manor leverages the firm by borrowing half the value of the unleveraged firm at an interest rate of 10% and the leverage causes the retired return on equity to increase to 18.89%?