A company is funded by:

   • $40 million of debt (market value)

   • $60 million of equity (market value)

The company plans to:

   • Issue a bond and use the funds raised to buy back shares at their current market value.

   • Structure the deal so that the market value of debt becomes equal to the market value of equity.

According to Modigliani and Miller's theory with tax and assuming a corporate income tax rate of 20%, this plan would: