Internetworks is considering issuing one-year debt. The estimates of the value of the interest tax shield and the probability of distress for different levels of debt are as follows.

Debt level (million dollar)	0	20	30	40	50	60	70
PV of Tax Shield (million dollar)	0	0.3	0.6	0.7	0.9	1	1.1
Probability of Financial Distress	0%	1%	2%	3%	10%	15%	35%

Suppose in the event of distress, the present value of distress costs is equal to $20 million. The optimal level of debt for Internetworks is:

a.

$30 million

b.

$40 million

c.

$50 million

d.

$20 million