AGHA Inc., which operates in perfect capital markets, has no debt, and generates a net operating profit each year in perpetuity of $2,000,000. The firm has a required return on assets of 10%. The firm decides to issue bonds paying 4% interest and use the proceeds to retire part of its equity. After the recapitalization is complete, the firm's cost of equity is 16%. What is the market value of the bonds sold by the company?

Select one:

a. $20 million.

b. $25 million.

c. $10 million.

d. $15 million.