Question: Answer is A, but not sure how to get there. please show all steps and calculations so I can fully understand how to solve. thank

Answer is A, but not sure how to get there. please

Answer is A, but not sure how to get there. please show all steps and calculations so I can fully understand how to solve. thank you

30. Consider the same two firms U and L - that are identical except for capital structure. Each firm expects EBIT of $650,000 each year forever. Firm U has a cost of equity of 10% and Firm L has $2 million in perpetual debt with a coupon rate of 7%. There is no chance of bankruptcy, but earnings of each are taxed at a rate of 45%. What is the value of firm L? A. 4,475,000 B. 5,575000 C. 3,575,000 D. 6,500,000 E. 650,000

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