Use the Following Information to Answer the Question(s)below

question 71

Multiple Choice

Use the following information to answer the question(s) below.
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 $25 million,then the optimal level of debt for d'Anconia Copper is:

• A)$50 million.
• B)$60 million.
• C)$70 million.
• D)$80 million.

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Definitions:

Common Stock

This is a type of security that signifies ownership in a corporation and represents a claim on part of the company's profits.

Dividends Payable

The amount of declared dividends that a company owes to its shareholders but has not yet paid.

P/E

Price-to-Earnings Ratio, a valuation metric used to measure a company's current share price relative to its per-share earnings.

Closing Price

The final price at which a security is traded on a given trading day.