Rally, Inc. is an all-equity firm with assets worth $25 billion, and 10 billion shares outstanding. Rally plans to borrow $10 billion and use the funds to repurchase shares. The firms corporate tax rate is 35%, and the debt will be permanent. What is the lowest price Rally can offer that will induce the shareholders to sell? What will be the price after the share repurchase in that case?

$3.50

$2.5

$25

$2.85