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Dream, Inc., has debt outstanding with a face value of $X million. The value of the...

Dream, Inc., has debt outstanding with a face value of $X million. The value of the firm would be $20 million if it were entirely financed by equity. The company also has 360,000 shares of stock outstanding that sell at $50 per share. The corporate tax rate is 30 percent. The expected bankruptcy cost is 0.7 million. If there is no other market friction like agency cost/benefit, what is X?

a. 1.99

b. 2.67

c. 3.30

d. 1.86

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