$($CHAPTER $16)$

Firm's capital structure$($For this problem, assume that all Miller$-$Modigliani assumptions hold.$)$

Apples & Oranges is currently an all$-$equity firm. Its management expects its Earnings Before Interest and Taxes to equal $$230,000$ every year in the future. Its cost of equity is $12\%.$ The firm faces a $28\%$ tax rate for all of its taxable income each year.

Apples & Oranges is contemplating taking a $$150,000$ loan at $6\mathrm{.}50\%$ annual interest rate.

The values in the table below are related to the firm's valuation. Fill it out! Round all dollar values to WHOLE dollar, and do NOT use the $"$$$"$ signs. $($You can type with or without the commas.$)$

If the firm remains all$-$equity If the firm takes the $$150,000$ loan

Firm's total value $

$

Firm's equity value $

$

Firm's debt value $

$

HINT: You won't need to use one of the numbers that is given.