1 . If interest tax shields are valuable , why don't all tax-paying firms borrow as much as possible ? 2 . Why does diversification reduce risk ? 3 . Does firm value increase when more debt is used ? 4 . Describe the main ways to implement stock repurchase and their definitions . Formula Sheet Expected Mean : E ( R ) = HPIR + PR2 + . p , Expected Variance : o " Xp , * ( R-H Standard Deviation o Portfolio Expected Retur ( R , ) = > WE ( R Portfolio Variance Var ( R ) Cov ( ( RA-HA ) " ( R Correlation Coefficient pan " COV ( RA , Rn ) / ( O'ON ) OAR / ( Oaon