The Kimberly Corporation is currently a zero growth firm with an expected EBIT of $100,000 and zero debt financing, and the cost of equity to an unleveled firm in the same risk class is 16.0 percent.

(b) Now, assume that Kimberly pays 30% corporate tax rate.but now decides to use $500,000

of 12.0 percent debt financing. Write down the value of the

firm according to the MM Proposition specification; Name the specific proposition and explain (in one, very short sentence)

why you can do so.