James Bay Water Park Company operates in a world with zero taxes and no financial distress.The firm has a debt/equity ratio of 1.The cost of equity is 15 percent and the cost of debt is 8 percent.The only difference between Lanudiere Resort Company and James Bay Water Park is that Lanudiere Resort has a debt/equity ratio of 2.According to M&M,the value of Lanudiere Resort will be:
A) greater than James Bay Water Park.
B) the same as James Bay Water Park.
C) less than James Bay Water Park.
D) insufficient information is provided to answer the question.
Correct Answer:
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