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XYZ Airlines is currently an unlevered firm. The company expects to generate$153.85 m in earnings before interest and taxes (EBIT), in perpetuity. The corporate tax

XYZ Airlines is currently an unlevered firm. The company\ expects to generate$153.85 m in earnings before interest and\ taxes (EBIT), in perpetuity. The corporate tax rate is 35\ percent, implying after-tax earnings of $100 m. All earnings\ after tax are paid out as dividends. The firm is considering a\ capital restructuring to allow $200 m of debt. Its cost of debt\ capital is 10 percent. Unlevered firms in the same industry\ have a cost of equity capital of 20 percent. What will the new\ value of XYZ Airlines equity be?

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