A Calgary fiRm with No Debt Has 200,000 Shares Outstanding

Multiple Choice

A Calgary firm with no debt has 200,000 shares outstanding valued at $20 each. Its cost of equity is 12%. The firm is considering adding $1 million in debt to its capital structure. The coupon rate
Would be 8% and the bonds would sell for par value. The firm's tax rate is 34%. How much will the
firm be worth after adding the debt?

A) $4.033 million
B) $4.180 million
C) $4.340 million
D) $4.660 million
E) $5.000 million