XYZ Limited is considering various levels of debt. Currently the company has no debt and it has a total market value of sh. 30 million. By undertaking debt the company believes that it can achieve a net tax advantage equal to 20% of the amount of debt. However the company will incur bankruptcy and More agency cost if it borrows too much. The companys MD believes that the company can borrow up to shs. 10 million without incurring any of this costs. However each additional Shs. 10 million increment in borrowing is expected to result to the cost cited being incurred. Moreover the costs are expected to increase at an increasing rate with leverage/gearing. The present value cost of various levels of debt is as follows:

Debt (shs. M)	PV cost of bankruptcy and agency cost (shs. M)
10	0
20	0.6
30	2.4
40	4.0
50	6.4
60	10

Advise the MD on the optimal amount of debt for the company. (10 marks)