Total assets $4,000 Tax rate 35% Operating income (EBIT) $500 Debt ratio 0 Interest expense $0 WACC 9% Net income $480 M/B ratio 1 The company has no growth opportunities (g = 0), so the company pays out all of its earnings as dividends (EPS = DPS). The consultant believes that if the company moves to a capital structure financed with 35% debt and 65% equity (based on market values) that the cost of equity will increase to 12% and that the pre-tax cost of debt will be 8%. If the company makes this change, what would be the total market value (in millions) of the firm? 1) $3,600 2) $4,200 3) $3,378 4) $3,106