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The present value of financial distress for a firm is $12 million if a firm were to go into bankruptcy in one year. What is
The present value of financial distress for a firm is $12 million if a firm were to go into bankruptcy in one year. What is the optimal amount of debt (due one year now) for the firm to use? 0 A $50 million debt: 1.0 PV interest tax shield: 1% chance of financial distress B) $60 million debt: 1.1 PV interest tax shield; 2% chance of financial distress C) $70 million debt: 1.2 PV interest tax shield; 8% chance of financial distress OD) $30 million debt: 1.3 PV interest tax shield: 18% chance of financial distress @ $90 million debt: 1.4 PV interest tax shield: 35% chance of financial distress
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