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Pacific Inc. has EBIT of $40m per year in perpetuity. The cost of capital of unlevered firm is 10%. Its current market values of

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Pacific Inc. has EBIT of $40m per year in perpetuity. The cost of capital of unlevered firm is 10%. Its current market values of debt and equity are $90mm and $223mm respectively. Its corporate tax rate is 20%. What is the decrease in the firm's value due to expected financial distress costs? A. $20 B. $25 C. $30 D. $35 E. $40 F. $45 G. $50

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