A Company Has a Current Tax Rate of 35% and Faces

A company has a current tax rate of 35% and faces a 10% chance that the its output prices will drop and it will lose 200,000 over the next year.The firm would then be in a 15% tax bracket if it faces a loss.Compute the net present value (NPV) from purchasing insurance if the rate of interest is 5% and the beta of the output prices is 0.

A) $2932
B) $3178
C) $3312
D) $3810
E) $2761