Assume that capital markets are perfect except for the existence of taxes and financial distress costs. The market value of ABC Co.'s equity is $250 million. ABC faces a corporate tax rate of 21% and has 25 million shares outstanding. It plans to borrow $100 million on a permanent basis and use the borrowed funds to finance a share repurchase program. The interest tax shields of ABC are as risky as its debt. If ABC's share price immediately rises to $10.04 after the share repurchase program is announced, what is the present value of ABC's financial distress costs?

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