value of the firm options:

107.24 million

96.07

96.60

84.90

value of the stock options:

56.90 million

68.60

68.07

79.24

cost of equity options: 0.15%

9.71%

9.06%

8.97%

2. Adding growth to the model Markum Co. has a value of $70 million. Carter is otherwise identical to Markum Co., but has $28 million in debt. Suppose that both firms are growing at a rate of 7%, the corporate tax rate is 38%, the cost of debt is 7%, and Markum's cost of equity is 9% (assume [su is the appropriate discount rate for the tax shield). 1 Use the Modigliani and Miller theory extension for growth to complete the following table. (Note: Round all final answers to two decimal places.) Markum Co. Carter Co. Value of the firm $70 million Value of the stock $70 million Cost of equity 9%