Your firm is considering issuing one-year debt, and has come up with the following estimates of...

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Your firm is considering issuing one-year debt, and has come up with the following estimates of the value of the interest tax shield and the probability of distress for different levels of debt: Suppose the firm has a beta of zero, so that the appropriate discount rate for financial distress costs is the risk-free rate of 5%. Which level of debt above is optimal if, in the event of distress, the firm will have distress costs equal to a. $3 million? b. $6 million? c. $24 milli Data table a. $3 millio (Click on the following icon in order to copy its contents into a spreadsheet.) If distress d Debt Level (in $ million) 0 40 50 60 70 80 90 PV (interest tax shield, $ million) Probability of Financial Distress 0.00 0.76 0.95 1.14. 1.33 1.52 1.71 0% 0% 1% 2% 7% 16% 31% Print Done Your firm is considering issuing one-year debt, and has come up with the following estimates of the value of the interest tax shield and the probability of distress for different levels of debt: Suppose the firm has a beta of zero, so that the appropriate discount rate for financial distress costs is the risk-free rate of 5%. Which level of debt above is optimal if, in the event of distress, the firm will have distress costs equal to a. $3 million? b. $6 million? c. $24 milli Data table a. $3 millio (Click on the following icon in order to copy its contents into a spreadsheet.) If distress d Debt Level (in $ million) 0 40 50 60 70 80 90 PV (interest tax shield, $ million) Probability of Financial Distress 0.00 0.76 0.95 1.14. 1.33 1.52 1.71 0% 0% 1% 2% 7% 16% 31% Print Done