Question: The Perpetual Motion Machine. is assessing its current capital structure and its implications for the welfare of its security holders. Perpetual is currently nancedentirelywith common

The Perpetual Motion Machine. is assessing its current capital structure and its implications for the welfare of its security holders. Perpetual is currently nancedentirelywith common stock, of which 100,000shares are outstanding. Given the risk of the underlying free cash ows generated by Perpetual Motion, investors currently require a 23% return on the Perpetuals common. Perpetual Motionss expected free cashows are $2.4 million next year expected to grow at 3% per year in perpetuity and it faces a corporate tax rate of 35%. The market risk premium is 6% and the risk-free rate is 5%.

(a)What is the value of Perpetual Motion, its equity value, the beta of its equity?

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