The Veblen Company and the Knight Company are identical in every respect except that Veblen is not levered. The market value of Knight Company's 5 percent bonds is $2.00 million. Financial information for the two firms appears here. All earnings streams are perpetuities. Neither firm pays taxes. Both firms distribute all earnings available to common stockholders immediately. Firms and individuals can borrow and lend at the same rate. Compare two trading strategies: 1) purchase 5% of Knight's equity; 2) purchase 5% of Veblen's equity on margin so that the investment in each company is equal. Which of the following is true? Investor should invest in Veblen because strategy 1) gives larger annual payoff. Investor should invest in Knight because strategy 2) gives larger annual payoff. Investor should invest in Veblen because strategy 2) gives larger annual payoff. Investor should invest in Knight because strategy 1) gives larger annual payoff. None of the above