An Unlevered Firm Has a Cost of Capital of 16

An unlevered firm has a cost of capital of 16% and earnings before interest and taxes of $225,000. A levered firm with the same operations and assets has both a book value and a face value of debt of $850,000 with an 8% annual coupon. The applicable tax rate is 34%. What is the value of the levered firm?

A) $928,125
B) $1,110,125
C) $1,178,125
D) $1,217,125
E) $1,778,125