1. Rivera Inc. is a publicly traded firm with 100 million shares trading at $ 10 a share and no debt outstanding. The firm announces that it will be borrowing $ 250 million and buying back its own stock. On the announcement, the stock price increases to $ 10.25 a share. If the tax rate for the firm is 40% and the cost of bankruptcy is estimated to be 30% of the unlevered firm value, estimate the probability of bankruptcy with the additional debt. (You can assume that the market is efficiently assessing the effect of the additional debt on firm value)