3. Coinbase has 10 million shares outstanding with a share price of $10. Initially, it has no debt. Coinbase's CFO decides to use permanent debt to raise cash to repurchase shares and exploit the benefits of the tax shield. However, the CFO also recognizes that higher debt increases the risk of financial distress. Based on simulations of the firm's future cash flows, the CFO has made the following estimates (in millions of dollars). Debt O 10 20 30 40 50 PV(Financial distress costs) 0 1 2 3.5 6 9 The corporate tax rate is 35%, the tax on investors' interest income is 35%, and tax on investors' equity income is 20%. a. What is the effective tax advantage of debt? b. What is the present value of the tax shield at debt = $10million? c. Considering both financial distress costs and tax shield, what is the firm's levered value after the leveraged recap at debt = $ 10million? d. What is the optimal level of debt? e. What is Coinbase's stock price after the leveraged recap using the optimal level of debt? 3. Coinbase has 10 million shares outstanding with a share price of $10. Initially, it has no debt. Coinbase's CFO decides to use permanent debt to raise cash to repurchase shares and exploit the benefits of the tax shield. However, the CFO also recognizes that higher debt increases the risk of financial distress. Based on simulations of the firm's future cash flows, the CFO has made the following estimates (in millions of dollars). Debt O 10 20 30 40 50 PV(Financial distress costs) 0 1 2 3.5 6 9 The corporate tax rate is 35%, the tax on investors' interest income is 35%, and tax on investors' equity income is 20%. a. What is the effective tax advantage of debt? b. What is the present value of the tax shield at debt = $10million? c. Considering both financial distress costs and tax shield, what is the firm's levered value after the leveraged recap at debt = $ 10million? d. What is the optimal level of debt? e. What is Coinbase's stock price after the leveraged recap using the optimal level of debt