Your firm is considering issuing one-year debt, and has come up with the following estimates of the value of the interest tax shield and the probability of distress for different levels of debt: 3. Suppose the firm has a beta of zero, so that the appropriate discount rate for financial distress costs is the risk-free rate of 5%. Which level of debt above is optimal if, in the event of distress, the firm will have distress costs equal to a. $2 million? b. $5 million? c. $25 million? a. $2 million? If distress costs are equal to $2 million, the optimal level of debt is $ million. (Round to the nearest integer.) Data Table - X (Click on the following icon in order to copy its contents into a spreadsheet.) 0 80 Debt Level (in $ million) 50 60 70 0.95 1.14 1.33 1% 2% 7% 0.00 40 0.76 0% PV (interest tax shield, $ million) Probability of Financial Distress 1.52 16% 90 1.71 31% 0% Print nt Don