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Tweedledee Ltd and Tweedledum Ltd have identical expected operating cash flows of $600 million in perpetuity, but Tweedledee is financed entirely by equity, while Tweedledums

Tweedledee Ltd and Tweedledum Ltd have identical expected operating cash flows of $600 million in perpetuity, but Tweedledee is financed entirely by equity, while Tweedledums capital structure includes 30 percent debt and 70 percent equity finance. Assume that the assumptions of a perfect capital market hold (including the assumption of risk-free debt), the measured equity beta for Tweedledee is 0.8, the yield on ten-year Government bonds is 6 percent and the market risk premium is 7 percent. Each firm has 500 million shares on issue.

What is the theoretical firm value for Tweedledum Ltd, rounded to the nearest $100 million?

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