(Answered) Please explain stepscompany a and b both have the same ebit

Finance

Please Explain Steps:

Company A and B both have the same EBIT of $3 million and tax rate of 30%. Company A is all-equity financed with a cost of capital of 12%, whereas Company B has debt of $7.5 million. What is Company B's firm value using the M&M Proposition?

Select one:

a. $15,250,000

b. $17,500,000

c. $19,750,000

d. $25,000,000

e. $27,250,000

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