Sam Corp. is currently unlevered. The firm has $960,000 in before-tax earnings and the unlevered cost of capital is 12%. The firm plans to issue $4,000,000 in debt to repurchase stock. The perpetual bonds have an 8% return. The tax rate is 40%. The present value of financial distress costs is $850,000. Use the trade-off theory to estimate the value of the levered firm.