15.16 An all-equity firm is subject to a 30-percent corporate tax rate. Its equityholders require a 20-percent return. The firm’s initial market value is $3,500,000, and there are 175,000 shares outstanding. The firm issues $1 million of bonds at 10 percent and uses the proceeds to repurchase common stock. Assume there is no change in the cost of financial distress for the firm. According to MM, what is the new market value of the equity of the firm?