1. Suppose that a firm adds debt to its capital structure, which takes its equity beta from 1.0 to 1.2. How much MORE would you typically expect the firm's stock to rise when the market rises by 1% ? a. 0.2% b. 0.2% c. 1.2% d. 0% (same firm, no effect) 2. Firm A and Firm B are identical in all respects except Firm B faces higher expected costs of financial distress. According to the tradeoff theory, Firm B should have: a. The same leverage b. More leverage c. Less leverage d. The amount of leverage doesn't matter 3. A company is evaluating a project. If it decides to undertake the project, it plans to raise funds using a combination of equity and debt that keeps the debt-to-value ratio constant. The corporate tax rate is 30%. Which of the following is the least amount of additional information the company needs to value the project: a. After-tax unlevered cash flows, cost of assets b. After-tax unlevered cash flows, cost of assets, debt-to-value ratio c. After-tax unlevered cash flows, cost of equity, cost of debt, debt-to-value ratio d. After-tax unlevered cash flows, cost of assets, cost of equity, cost of debt, debt-to-value ratio