1. CapitalIQ is an all-equity firm, which has a pretax cash flow (EBIT) of $5 million each year and it expects that this pretax cash flow is perpetual. The firm has 1 million shares outstanding, the cost of capital of 10%, and the corporate tax rate of 35%. CapitalIQ plans to announce a leveraged recapitalization plan in which it will borrow $5 million and use these funds to repurchase shares. It also plans to keep its outstanding debt equal to $5 million permanently. After the share repurchase plan, the equity value of CapitalIQ is closest to

   	A.	$27.00 million
   	B.	$29.25 million
   	C.	$10.00 million
   	D.	$32.25 million