Whats Up Corporation expects an EBIT of $100,000 every year FOREVER. Whats Up Corp currently has no debt and its cost of capital is 10 percent. If the firm borrows, it can borrow at 6%. If the corporate tax rate is 30 percent, what is the unlevered value of the firm? [Chap 16]

A. What is the UNLEVERED value of the firm, V_U?

B. Assuming no bankruptcy costs (that is, Case II), if Whats Up Corp borrows $200,000, what is the value of Whats Up as a LEVERED firm, V_L?