Homework: HW16 Score: 0 of 1 pt P16-13 (similar to) Sav 3 of 6 (5 complete) HW Score: 66.67%, 4 of 6 Question Help 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: 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. $5 million? C. $23 million? a. $2 million? If distress costs are equal to $2 million, the optimal level of debt is S million. (Round to the nearest integer.) Data Table (Click on the icon located on the top-right coner of the data table below in order to copy its contents into a Debt Level (in $ million) 60 40 PV (interest tax shield, S million 0.00 0.76 0.95 1.14 33 1.52 1.71 0% 50 70 80 90 Probability of Financial Distress 0% 1% 2% 7% 16% 31% Print Done