Yellow Hammer Construction is considering a change in its capital structure. The company has $50 million in debt carrying a rate of 7%, and its stock price is $60 per share with 2 million shares outstanding. Homestead is a zero-growth firm and pays out all of its earnings as dividends. The firms EBIT is $30.5 million, and it faces a 40% federal-plus-state tax rate. The market risk premium is 6%, the risk-free rate is 4%, and the company has a beta of 1.2. Homestead is considering increasing its debt level to a capital structure with 40% debt, based on market values, and repurchasing shares with the extra money that it borrows. The company will retire old debt in order to issue new debt, and the rate on the new debt will be 8%. What is the value of the firm with 40% debt?

$200,864,082

$178,922,237

$204,567,913

$199,816,562