Suppose That Your Firm's Current Unlevered Value, V*, Is $800,000

Suppose that your firm's current unlevered value, V*, is $800,000, and its marginal corporate tax rate is 35 percent.Also, you model the firm's PV of financial distress as a function of its debt level according to the relation: PV of financial distress = 800,000 × (D/V*) 2.What is the firm's levered value if it issues $200,000 of perpetual debt to buy back stock?

A) $820,000.
B) $869,555.
C) $920,000.
D) $350,000.