1. Two firms, A Ltd and B Ltd operate in the same industry. The two firms are similar in all aspects except for their capital structures. The following additional information is available.

1. A Ltd is financed using $100million worth of ordinary shares.
2. B Ltd is financed using $50 million in ordinary shares and $50 million in 7% debentures.
3. The annual earnings before interest and Tax are $10 million for both firms. These earnings are expected to remain constant indefinitely.
4. The cost of Equity in A Ltd is 10%
5. The corporate Tax rate is 30%.

Required:

Using the Modigliani and Miller (MM) model, determine the market value of A Ltd and B Ltd