Manitoba Flat Land (MFL)Company Has a Perpetual EBIT of $10,000,an

Manitoba Flat Land (MFL) Company has a perpetual EBIT of $10,000,an unlevered cost of equity of 5 percent,zero debt,and faces a tax rate of 40 percent.The firm has 1,000 shares outstanding.MFL issues $5,000 of perpetual debt which pays interest of $500 per year and uses the proceeds of the debt issue to repurchase shares.The change in the value of the firm is:

A) no change in the value.
B) increase by $2,000.
C) increase by $3,000.
D) increase by $5,000.