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Question
d'Anconia Copper 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:
If in the event of distress, the present value of distress costs is equal to $5 million, then the optimal level of debt for d'Anconia Copper is:
A) $25 million
B) $50 million
C) $60 million
D) $70 million
Answer
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