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:

Debt level ($ Million)

	0	40	50	60	70	80	90
PV (interests tax shield, $ Million)	0.00	0.76	0.95	1.14	1.33	1.53	1.71
Probability of financial distress	0%	0%	1%	2%	7%	16%	31%

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

1. $2 million?

2. $5 million?

3. $25 million?