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 800,000 and the number of bonds is 400,000
• The constant annual dividend per share is $3.5
• The bonds have an annual fixed coupon payment of $10
• 10-year government bonds have a yield of 1.2% and the market risk premium is 4%
• The beta of levered equity is 1.3
• The beta of the bonds is 1.5

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

a.

$55.2 million

b.

$73.4 million

c.

$99.3 million

d.

$61.3 million

e.

$86.2 million