3. A firm is debt-free and has a weighted average cost of capital of 12.7 percent. The current market value of the equity is $2.3 million and there are no taxes. According to M&M Proposition I and assuming a perfect capital market, what will be the value of the company if it changes to a debt equity ratio of 0.85? Please show your work.

A) $18,110,236 B) $1,955,000 C) $15,393,701 D) $2,705,882 E) $2,300,000