Suppose the corporate tax rate is 40%. Consider a firm that earns $1000 before interest and taxes each year with no risk. The risk-free interest rate is 5%. (Please show steps and formulas)

1. Suppose the firm has no debt and pays out its net income as dividend each year. What is the value of the firms equity?
2. Suppose instead the firm makes interest payments of $500 per year on a perpetual bond. What is the value of equity? What is the value of debt?
3. What is the difference between the total value of the firm with leverage and without leverage?
4. To what percentage of the value of the debt is the difference in part 3. equal?