Use the following information to value a firms assets.

Assume the following:

• the market value of the firm's assets is expected to remain constant over time so the firm doesn't grow and can be valued as a level perpetuity,
• the firm has a constant debt-to-assets ratio,
• the bonds are priced at par, and
• the stock's expected capital returns are zero.

Relevant data:

• The number of shares on issue is 1 million and the number of bonds is 500,000
• The constant annual dividend per share is $4
• The bonds have an annual fixed coupon payment of $5
• 10-year government bonds have a yield of 2.5% and the market risk premium is 6%
• The beta of levered equity is 0.7
• The beta of the bonds is 1.2

Which of the following is the market value of the levered firms assets?

a.

$54.8 million

b.

$85.5 million

c.

$92.1 million

d.

$69.2 million

e.

$100.6 million