Sue Inc. is an unlevered firm that has EBIT of $$2,000,000$ and a required return on equity of $10\%.$ The firm has a corporate tax rate of $40\%$ and has estimated that the tax rates for its investors are $25\%$ on stock income and $50\%$ on bond income. Assume That the Miller's personal tax case holds.

a$)$ Assume that Sue Inc. can issue any level of debt for a fixed $($before$-$tax$)$ rate of $8\%.$ What will the total value of the firm be if it issues the following levels of debt and uses the proceeds to repurchase shares:

$$1,000,000$

$$2,000,000$

$$5,000,000$

$$10,000,000$

b$)$ Using the same assumptions as in $($a$),$ assume the firm estimates that the present value of any financial distress costs would be $$1,800,000.$ The probability of financial distress for each level of debt is:

$\backslash$table$[[$Amount of Debt,Probability of Distress$],[$$$0,0\%$O