Yamamoto Inc manufactures semi-conductor chips. The company has a debt-equity ratio of 30 percent and makes interest payments of $106,000 at the end of each year. The company estimates that annual sales will be $6 million; annual cost of goods sold will be $2 million; and annual general and administrative costs will be $1.25 million. These cash flows are expected to remain the same forever. The corporate tax rate is 22 percent. The company's unlevered cost of equity is 12%.

a. Determine the levered cost of equity for Yamamoto

b. Determine the value of the company's equity using the FTE method.