7. Compton Corporation currently has no debt in its capital structure. As an unlevered firm, its cost of equity is 9 percent. It is considering substituting $40,000 in debt at 4 percent interest. The EBIT for the firm is $15,000 under either scenario, and the tax rate is 35 percent. According to M&M with taxes, how much value will be added to the firm by substituting $40,000 in debt?

Group of answer choices

a. $8,000

b. $14,000

c. $18,000

d. $22,000