The Veblen Company and the Knight Company are identical in every respect except that

Veblen is not levered. The Knight Company's $5$ percent bonds sell at par value. Financial

information for the two firms appears below. All earnings streams are perpetuities.

Neither firm pays taxes. Both firms distribute all earnings available to common

stockholders immediately.

a$-1.$ What will the annual cash flow be to an investor who purchases $5$ percent of

Knight's equity? $($Do not round intermediate calculations and enter your answer in

dollars, not millions of dollars, e$.$g$.,1,234,567.)$

a$-2.$ What is the annual net cash flow to the investor if $5$ percent of Veblen's equity is

purchased instead? Assume that borrowing occurs so that the net initial investment

in each company is equal. The interest rate on debt is $5$ percent per year. $($Do not

round intermediate calculations and enter your answer in dollars, not millions of

dollars, e$.$g$.,1,234,567.)$