The Telescoping Tube Company is planning to raise $2,500,000 in perpetual debt at 11% to finance part of their expansion. They have just received an offer from the Albanic County Board of Commissioners to raise the financing for them at 8% if they build in Albanic County. What is the total added value of debt financing to Telescoping Tube if their tax rate is 34% and Albanic raises it for them?

$850,000

$1,200,000

$1,300,000

$1,650,000

There is no value to the scheme; Albanic is just conning Telescoping Tube into moving.