Alpha Corporation and Beta Corporation are identical in every way except their capital structures. Alpha Corporation, an all equity firm, has 15,000 shares of stock outstanding, currently worth GH¢ 30...

Alpha Corporation and Beta Corporation are identical in every way except their capital structures. Alpha Corporation, an all equity firm, has 15,000 shares of stock outstanding, currently worth GH¢ 30 per share. Beta Corporation uses leverage in its capital structure. The market value of Beta’s debt is GH¢ 65,000 and its cost of debt is 9 percent. Each firm is expected to have earnings before interest of GH¢ 75,000 in perpetuity. Neither firm pays taxes. Assume that every investor can borrow at 9 percent per year.

1. 
   
   What is the value of Alpha Corporation?


2. 
   
   What is the value of Beta Corporation?


3. 
   
   What is the market value of Beta Corporation’s equity?