a. $2 million?

If Distress costs are equal to $2 million, the optimal level of debt is $___ million (Round to the nearest integer.)

b. $6 million?

If Distress costs are equal to $6 million, the optimal level of debt is $___ million (Round to the nearest integer.)

c. $24 million?

If Distress costs are equal to $24 million, the optimal level of debt is $___ million (Round to the nearest integer.)

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: B. 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. $2 million? b. $6 million? c. $24 million? Data table a. $2 million? (Click on the following icon in order to copy its contents into a spreadsheet.) If distress costs are equal to $2 million, the optimal level of debt is $ million. Debt Level (in $ million) 50 60 70 0 40 80 90 PV (interest tax shield, $ million) Probability of Financial Distress 0.00 0% 0.76 0% 0.95 1% 1.14 2% 1.33 7% 1.52 16% 1.71 31%