Duffy was just hired as CEO of Dog Food Inc. (DF), which has no debt on its balance sheet. He also forecasts that the firm is expected to pay $200 million/year in taxes and is expected to have a constant 20% tax rate. Assuming no bankruptey costs, but personal taxes of 30% on income from equity and 50% on income from interest, if Duffy were to issue $75 million in perpetual debt at 8%, what is the present value of the tax shicld? $12 mil $8mil 59mil $14mil The present value of financial distress for a firm is $1 million if a firm were to go into bankruptcy in one year. What is the optimal amount of debt (due one year now) for the firm to use? A) $50 million debt; 1.0PV interest tax shield; 1% chance of financial distress B) $60 million debt; 1.1 PV interest tax shield; 2% chance of financial distress C) $70 million debt; 1.2 PV interest tax shield; 8% chance of financial distress D) $80 million debt; 1.3PV interest tax shield: 18% chance of financial distress E) $90 million debt: 1.4PV interest tax shield; 35% chance of financial distress Corona B' Gone a start-up firm has no current products: however, it has three products it can invest in that will pay off in one year. In the first, the company has a 100% chance of $75 million payoff. In the second, the company has a 50% chance of $140 million and a 50% chance at $0 million. In the third, the company has a 10% chance of a $300 million payoff and a 90% chance of a payoff of $40 million. What is the best choice for equity holders if the firm has $110 million of debt due in one year. A) Project A (100\% chance of $75 million) B) Project B (50\% chance at $140 million) C) Project C (10\% chance at $300 million and 90% chance at $40 million) D) All are equal E) There is insufficient information to answer this