An unlevered firm has a value of $800 million. An otherwise identical but levered firm has $60 million in debt at a 5% interest rate, which is its pre-tax cost of debt. Its unlevered cost of equity is...

An unlevered firm has a value of $800 million. An otherwise identical but
levered firm has $60 million in debt at a 5% interest rate, which is its
pre-tax cost of debt. Its unlevered cost of equity is 11%. After Year 1, free
cash flows and tax savings are expected to grow at a constant rate of 3%.
Assuming the corporate tax rate is 35%, use the compressed adjusted present value model to determine the value of the levered firm. (Hint: The interest expense at Year 1 is based on the current level of debt.)