The Market Value of DeLoach Photography's Debt Is $200,000 and Its

Multiple Choice

The market value of DeLoach Photography's debt is $200,000 and its yield is 8%.The firm's equity has a market value of $800,000, its free cash flows are growing at a 4% rate, and its tax rate is 25%.A similar firm with no debt has a cost of equity of 12%.Using the compressed adjusted present value (CAPV) model, what would its total value be if it had no debt?

A) $878,750
B) $925,000
C) $950,000
D) $997,500
E) $1,050,000