Overnight Publishing Company (OPC) has $3.8 million in excesscash. The firm plans to use this cash either to retire all of itsoutstanding debt or to repurchase equity. The firm’s debt is heldby one institution that is willing to sell it back to OPC for $3.8million. The institution will not charge OPC any transaction costs.Once OPC becomes an all-equity firm, it will remain unleveredforever. If OPC does not retire the debt, the company will use the$3.8 million in cash to buy back some of its stock on the openmarket. Repurchasing stock also has no transaction costs. Thecompany will generate $1,430,000 of annual earnings before interestand taxes in perpetuity regardless of its capital structure. Thefirm immediately pays out all earnings as dividends at the end ofeach year. OPC is subject to a corporate tax rate of 23 percent andthe required rate of return on the firm’s unlevered equity is 12percent. The personal tax rate on interest income is 30 percent andthere are no taxes on equity distribution. Assume there are nobankruptcy costs. a. What is the value of OPC if it chooses toretire all of its debt and become an unlevered firm? (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to the nearest whole number, e.g.,1,234,567.) b. What is the value of OPC if it decides to repurchasestock instead of retiring its debt? (Hint: Use the equation for thevalue of a levered firm with personal tax on interest income fromProblem 9 in the textbook.) (Do not round intermediate calculationsand enter your answer in dollars, not millions of dollars, roundedto the nearest whole number, e.g., 1,234,567.) c. What is the valueof OPC if the expected bankruptcy costs have a present value of$800,000? (Do not round intermediate calculations and enter youranswer in dollars, not millions of dollars, rounded to the nearestwhole number, e.g., 1,234,567.)