You have $10m in non-amortizing bonds outstanding, with 15 years left, 12% annual interest coupon, and the total principal repayment due at the end of the term. Your bondholders have offered to sell the bond back to you at par value. Assume a tax rate of 35%.

At the same cost of capital of 20%, what is the value of option B to current shareholders?

• -3,556,583
• -4,924,077
• 4,103,397
• 212,978