Floundering Fish Ltd. Is an all equity firm with EBIT of $950,000 per year which will continue forever as the company pays out all earnings in the form of dividends. T-bills are currently yielding 2%; the market risk premium is 5%; the companys tax rate is 40%; and costs of financial distress apply. Assume the market value of debt is equal to its book value. Beta of all equity firm is 0.85. What would be the value of the company if it issues $3 million in debt, with a cost of debt of 5% and a Beta of 1.6? What would be the present value of financial distress costs if the firm issues $3 million in debt ? What is the optimal capital structure: debt of 0, $2 million or $3 million?