. Reese, Inc., has debt outstanding with a face value of $7 million. The value of the firm if it were entirely financed by equity would be $19.75 million. The company also has 350,000 shares of stock outstanding that sell at a price of $40 per share. The corporate tax rate is 35 percent. What is the decrease in the value of the company due to expected bankruptcy costs?

A.$650,000

B.$1,200,000

C.$19,750,000

D.750,000

E.Impossible to calculate with information given.

Please show calculations