Mirion, Inc., has a debt-equity ratio of 50 percent, with no preferred stock.However, Mirion now plans to raise enough preferred stock to retire half of its outstanding common stock.Its common equity is currently valued at $7 million.Which of the following choices displays Mirion's market value capital structure, in market values (i.e., V = D + P + E), after the preferred stock issue?

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The preferred stock issue will retire half of the outstanding common stock, so the new market value of common equity will be $3.5 million. The debt-equity ratio will remain at 50 percent, so the market value of debt will also be $3.5 million. The market value of preferred stock will be $3.5 million. Therefore, the market value capital structure will be:V = D + P + E10.5[V] = 3.5[E] + 3.5[P] + 3.5[D]