Problem: The total market value of a firms assets is currently $11 million. At the moment, the company is financed exclusively by equity. Suppose that the firm issues $1 million dollars of debt, in the form of a perpetuity, and then uses this debt to replace some of the equity in its capital structure (i.e., it changes its capital structure but does not purchase new assets). Suppose that interest payments on the firms debt are tax deductible. The firm can borrow at 8% interest and pays corporate taxes at a 20% rate. What will be the total value of the firm (the value of debt plus equity) after this change to the firms capital structure?

Answer: 11,200,000

Could you please explain this?