Newton Manufacturing is an all equity financed firm with a current market value of $12 million. Management is considering the use of debt, which would be used to buy back stock, with the overall size of the firm remaining the same. Analysts have estimated the present value of any bankruptcy to be approximately $8 million and anticipate that the firm's optimal capital structure will be achieved by carrying $5 million of debt, at which point the firm has an 8% probability of failure. Newton is in the 40% tax bracket. What is the present value of Newton's tax shield benefit at the anticipated optimal capital structure?

Please write it out step by step! please do not do in excel