In the Year Just Past (Year 1)Kaos Corp

In the year just past (Year 1) Kaos Corp.had no debt.Today is January 1 of Year 2.Kaos is considering a plan to sell bonds worth $25B and use the proceeds to repurchase 2.5B shares (on the open market at $10/share) .If Kaos maintains this new level of debt in perpetuity,then what is the present value of the resulting interest tax shields? Assume that the debt is sold immediately,that the bonds are a perpetuity,and that interest is paid at the end of each year.Assume that the coupon rate on the bonds is 6% and that the tax rate is 15%.

A) $0.23B
B) $3.75B
C) $6.0B
D) $21.25B
E) $25B