Answer the following questions with detailed explanations. Keep the format reader-friendly. For example, use bullet points and highlights to structure your answers.

1) Discuss the relationship between the cost of debt and firm value for each of the following three scenarios. (15 marks)

a) No tax and no bankruptcy costs. (b) With tax but no bankruptcy costs. (c) With both tax and bankruptcy costs.

2) List and explain methods we can use to estimate the required return (or discount rate) of an investment project. (15 marks)