Cool Refreshments Has Bonds Outstanding with a Face Value of $140,000

Multiple Choice

Cool Refreshments has bonds outstanding with a face value of $140,000 that are selling at par.It also has 15,000 shares of stock outstanding that are selling for $19.80 a share.The all-equity value of the firm is $395,000.The tax rate is 34 percent.What is the value of the financial distress costs? Assume there are no other claims on the firm.

A) $5,600
B) $4,800
C) $6,200
D) $5,100
E) $6,500