Marbel is a large all-equity retailer. The firm has just unexpectedly announced that it will borrow $200M and will use the proceeds to buy back shares. The firm will keep this amount of debt permanently. The corporate tax rate is 25%. The firm has 30M shares outstanding that traded for $13 in the stock market right before the announcement. At the announcement of this restructuring, the stock price increased to $14 per share. Assume that the only market imperfections are corporate taxes and financial distress costs.

Given the announcement reaction, what is the markets estimate for the present value of financial distress costs PV (F DC)? (A) $ 10M (B) $ 20M (C) $ 25M (D) $ 30M