NARRBEGIN: Bavarian Brew Bavarian Brew

NARRBEGIN: Bavarian Brew
Bavarian Brew
Bavarian Brew,an unlevered firm,has an expected EBIT of $500,000.The required return on assets for the firm's assets is 10%.The company has 250,000 shares outstanding.The company is considering raising $1 million in debt with a required return of 6% and would use the proceeds to repurchase outstanding stock.
-What is the value of Bavarian Brew before restructuring? Assume a corporate tax rate of 34%.

A) $5,000,000
B) $500,000
C) $3,300,000
D) $1,000,000