You are given the following information: EBIT (for firms L and U in perpetuity) = $300,000; corporate tax rate (T) = 0.0%; cost of equity for firm U (K_su or r_su) = 10%; cost of debt for firm L (K_d or r_d) = 8%; level of debt for firm L (D) = $1,200,000.

What are the values of firm L (V_L) and firm U (V_u), respectively, using the M&M theory with zero corporate taxes (i.e., T=0)?

	1.	$3.0 million (U), $4.2 million (L)
	2.	$3,000,000 (U), $3,000,000 (L)
	3.	$1,500,000 (U), $1,500,000 (L)
	4.	Cannot be determined without additional information.