Rubberware, Inc. is considering increasing its financial leverage to achieve an optimal capital structure. The firm plans to use the cost of capital approach to arrive at its decision. Rubberware has a current market value of $383 million. The free cash flow to the firm (FCFF) is $22 million and the projected growth rate in FCFF is 5%. The company's current cost of capital is 12%, but this is expected to decrease to 11% at the optimal capital structure. What is the anticipated change in firm value with a move to the optimal debt ratio?

Select one:

A. $2.0 million

B. $2.5 million

C. $3.4 million

D. $3.8 million

E. $4.2 million

Please write out in a step by step format and do not do in excel! Thanks