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Tomkat Corp. has only a single asset. This assetgenerates operating cash flow of $200,000 per year, inperpetuity. Tomkat also has a single liability,which is a perpetual bond (the maturity date is infinitely far inthe future) that has a face value of $1 million and that payscoupon interest at a rate of 8% once per year. Theappropriate discount rate for all cash flows in this problem is 10%per year. (a) What is the value of Tomkat’s equity? Assume now,that in addition to the asset and liability described above, Tomkatis working on a new project. The project requiresan immediate investment of $400,000, and will require anotherinvestment of $600,000 a year from now. Two years fromnow the project will generate a positive operating cash flow of$60,000, and subsequent operating cash flows will grow by 5% peryear in perpetuity. Continue to assume a discount rateof 10% per year. (b) What is the value of Tomkat’s equity given theexistence of this “growth opportunity”?