Your firm just received news that the bank is willing to lend it $1,500,000. Unfortunately, if you borrow this money then this will result in $350,000 of financial distress or bankruptcy costs. The tax rate is 30%. How much does value change if the firm takes on this additional debt?
a) -$350,000
b) $300,000
c) -$100,000
d) $350,000
e) $100,000
f) $800,000