Firms use the trade-off theory to find optimal leverage (i.e. Value of Levered Firm = Value of Unlevered Firm + PV(Tax Shield) - PV(Distress Costs). What are two key factors used to determine the present value of distress costs?

Group of answer choices

probability of distress and magnitude of bankruptcy costs

beta of levered firm and interest rate expense

beta of unlevered firm and value of tax shield

amount of equity and interest rate expense