Firm B has expected EBIT = $1,100, debt with a face and market value of $3,500 paying a 7% annual coupon. The corporate tax rate is 25%. An identical firm with no financial leverage has an equilibrium equity capitalization rate of 12%. Based on MM Proposition III (the value of the levered firm is equal to the value of the unlevered firm plus the present value of the debt tax shield), what is the value of Firm B?

Group of answer choices

$5,525

$6,125

$7,750

$5,625

$6,825