I can not figure out what formula to use or how to calculate this problem - plea

Question

I can not figure out what formula to use or how to calculate this problem - please show me the work or formula so I can do the problem myself too :) Thank you!!

Trade International is an all-equity firm that has projected earnings before interest and taxes of $497,000 forever. The current cost of equity is 16% and the tax rate is 34%. The company is in the process of issuing $1.5 million of bonds at par that carry a 6% annual coupon. What is the unlevered value of the firm (in millions)? (Note: You should use MM capital structure model with corporate taxes, but without personal taxes and bankruptcy costs.)

Answer

A

$2.05 million

B

$2.36 million

C

$2.56 million

D

$2.85 million

A

$2.05 million

B

$2.36 million

C

$2.56 million

D

$2.85 million

Explanation / Answer

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