With reference to the M&M irrelevance theorem, calculate the market value of an unlevered firm (U) and

Question:

With reference to the M&M irrelevance theorem, calculate the market value of an unlevered firm (U) and an identical risk-levered firm (L). The expected EBIT of the unlevered firm (U) = $1.5 million, which will remain constant indefinitely. The is 12 percent. If the levered firm (L) has $6 million debt outstanding, what is the market value of the equity?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...