Perez & Perez (P&P), based in a country currently without any taxes, has an annual operating income (EBIT) of 3 million in perpetuity. The company is currently 100 percent equity financed and, based on its current capital structure, its shareholders have a required rate of return of 12 percent. P&P is considering issuing 10 million in debt and using the proceeds to repurchase common shares. The debt will be issued at par and will have an 8.0 percent coupon. If the country implements a 30 percent corporate tax rate and Modigliani and Miller's Propositions I and II with taxes apply, the value of the firm before the debt issuance and share repurchase is closest to:

Group of answer choices

35.7 million.

25.0 million.

17.5 million.

Perez & Perez (P&P), based in a country currently without any taxes, has an annual operating income (EBIT) of 3 million in perpetuity. The company is currently 100 percent equity financed and, based on its current capital structure, its shareholders have a required rate of return of 12 percent. P&P is considering issuing 10 million in debt and using the proceeds to repurchase common shares. The debt will be issued at par and will have an 8.0 percent coupon. If the country implements a 30 percent corporate tax rate and Modigliani and Miller's Propositions I and II with taxes apply, the value of the firm after the debt issuance and share repurchase is closest to:

Group of answer choices

28.0 million.

17.5 million.

20.5 million.