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The Peru firm is currently financed with 100% equity and the cost of equity for this unlevered firm is 9%. Suppose the cost of

The Peru firm is currently financed with 100% equity and the cost of equity for this unlevered firm is 9%. 

The Peru firm is currently financed with 100% equity and the cost of equity for this unlevered firm is 9%. Suppose the cost of debt is 6% (before tax) and its earnings before interest and taxes (EBIT) is $270,000. Peru firm is considering employing 15% debt and 85% equity. Mr. Pau, the owner of Peru, believes that the capital market is perfect and corporate tax rate is zero. Please show using calculations for cost of capital and value of the firm to Mr. Pau that the cost of capital (WACC) and market value for levered firm and unlevered with its current EBIT is the same. Assume Peru firm's earnings has zero growth.

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