Question: 2 9 . Gribble Bug Exterminators are financed by pure equity and expect EBIT to be $ 2 2 , 0 0 0 perpetually, and

29. Gribble Bug Exterminators are financed by pure equity and expect EBIT to be
$22,000 perpetually, and have a cost of equity of 13%, with a tax rate of 35%.
Assume that M&M Proposition 1 & 2 hold and there are no bankruptcy costs. What is
the value of the firm under the optimal capital structure? (Answer: E)
a. $120,500
b.$129,250
c. $132,750
d. $139,750
e. $148,500

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