Suppose a firm has future perpetual annual EBIT of either $100,000 (with 50% chance) or $200,000 (with 50% chance) and the expected return on equity is 15%, the expected return on debt is 10%, the corporate tax rate is 40%, and in the event of financial distress the assets are worth $0. a. What is the firm value of an all equity firm? (Hint: for perpetual annual payments the NPV=payment/WACC and for an all equity firm WACC is expected return on equity) b. What is the firm value of a firm that issues $750,000 worth of debt (resulting in $150,000 of annual interest payments)