Levered, Inc. and Unlevered, Inc. are identical in every way except for their capital structures. Each company expects to earn $29 million before interest per year in perpetuity, with each company distributing all of its earnings as dividends. Levered's perpetual debt has a market value of $91 million and costs 8 percent per year. Levered has 2.3 million shares outstanding, currently worth $105 per share. Unlevered has no debt and 4.5 million shares outstanding, currently worth $80 per share. Neither firm pays taxes. Suppose you were considering purchasing stock in one of these companies. Which firm's equity shares represent a better value? Equity shares in the unlevered firm are the better buy. The answer cannot be determined from the information provided. Equity shares in the two firms are of equal value. Equity shares in the levered firm are the better buy.