ABS Inc is an all-equity firm. Management has estimated the firm's earnings before interest and taxes (EBIT) to be $389,000 annually forever. The present cost of assets is 12.5 percent. Currently, the firm has no debt but is considering borrowing $0.5 million at 8 percent interest. The tax rate is 35 percent. What will be the value of the levered firm?

A:

$3,287,000

B.

$2,036,800

C.

$2,062,800

D.

$2,197,800

E.

$2,522,800