1. Pacific Inc. has EBIT of $50m per year in perpetuity. The cost of capital of unlevered firm is 10%. Pacific's current market values of debt and equity are $100mm and $260mm respectively. its corporate tax rate is 30%, what is the decrease in the firm's value due to expected financial distress costs? 2. Why do firms in the high-technology industries, such as internet and biotech, tend to have low leverage while firms in mature industries, such as utilities and consumer products, tend to have high leverage? 3. Does optimal capital structure exist for a firm in a world with taxes and financial distress costs? You may illustrate your reasoning with a graph