U and L are two firms with the same EBIT of $100,000. They are identical in every respect except firm L has a debt of $7

[answerhappygod]

U and L are two firms with the same EBIT of $100,000. They
are identical in every respect except firm L has a debt of $750,000
at 6% rate of interest. The cost of equity of firm U is 8% and that
of firm L is 10%. Assume that arbitrage principle will be
applied in this setting and it is possible to make an arbitrage
profit (surplus). Also, all earnings streams are
perpetuities, taxes are ignored and both firms distribute all
earnings available to common stockholders.
Assume that an investor has 20% of shares (equity) of the firm L
and MM assumptions hold. That is, you will be able to borrow
or lend at the same rate as the firms can (6%). How much would the
arbitrage profit (surplus) be for that investor who owns 20% of
equity of the firm L and plans to create that arbitrage by
switching to firm U?