4. The Wallace Corporation is an unlevered, zero growth firm with an expected EBIT of $ 2 million and corporate tax rate of 40 percent. Its cost of equity is 10.0 percent, and its market value is S = V = $ 12 million. The firm is considering the use of debt financing. The firm's analysts have estimated that the present value of any financial distress costs associated with debt financing would be $ 8 million, and that the probability of distress would increase with the use of debt according to the following schedule : Value of Debt Probability of distress $0 0.0% 2,500,000 2.5 5,000,000 5.0 7,500,000 10.0 10,000,000 12,500,000 15,000,000 25.0 50.0 75.0 b) What is the firm's approximate optimal debt to value ration when financial distress costs are considered? 4. The Wallace Corporation is an unlevered, zero growth firm with an expected EBIT of $ 2 million and corporate tax rate of 40 percent. Its cost of equity is 10.0 percent, and its market value is S = V = $ 12 million. The firm is considering the use of debt financing. The firm's analysts have estimated that the present value of any financial distress costs associated with debt financing would be $ 8 million, and that the probability of distress would increase with the use of debt according to the following schedule : Value of Debt Probability of distress $0 0.0% 2,500,000 2.5 5,000,000 5.0 7,500,000 10.0 10,000,000 12,500,000 15,000,000 25.0 50.0 75.0 b) What is the firm's approximate optimal debt to value ration when financial distress costs are considered