Goodyear is thinking of divesting one of the plants. The plant will generate free cash flows (FCF) of $3.8 million at the end of the first year and the cash flows will grow at 3%. The plant is financed with a debt of 50 million which is expected to remain constant. The plant has an equity cost of capital of 14% and a debt cost of capital of 6%, and a marginal tax rate of 40%. Assuming a market risk premium of 8% and an equity beta of 1, calculate the effective tax rate (T*).

a) 40%

b) 35%

c) 30%

d) 45%