Flimsy Construction Inc generates perpetual annual EBIT of $500. The c

Flimsy Construction Inc generates perpetual annual EBIT of $500. The cost of unlevered equity for Flimsy is 10%. The corporate tax rate is 35%. Flimsy has 300 shares outstanding that trade for $6.89. Flimsy has debt worth $1,512.

What is the present value of financial distress costs for Flimsy? Assume that there are no other market imperfections other than costs of bankruptcy.
A) $100
B) $200
C) $300
D) $400
E) $500

ANSWER

B