Wild Berry (WB) will remain in business for one more year. At the end of next year, the firm will generate a liquidating cash flow of $370M in a boom year and $150M in a recession year; both states are equally likely. The cost of equity for the unlevered firm is rU = 10%. The firms outstanding debt matures in a year and has a market (and book) value of $150M today. The interest payment on this debt is $15M at the end of next year. The corporate tax is c = 35%. Corporate taxes is the only relevant market imperfection

If the discount rate for the interest tax shield is rITS = 5%, the value of the interest tax shield (PV (ITS)) is: (A) $ 2.5M (B) $ 5.0M (C) $ 6.0M (D) $ 7.5M