PLEASE SHOW ALL WORK!!! NO EXCEL OR TABLES PLEASE!!!!

1. Suppose company ABC has an equity beta (BL) of 1.5 and debt-to-firm value of ratio of 0.4. Find the un-levered beta for this company. Assume the corporate tax rate is 25%.

a) 0.3

b) 0.6

c) 1.0

d) 1.8 7.

2. When firms issue more debt, the tax shield on debt______________, the costs of financial distress _____________, and the risk to shareholders___________________.

a) Increases, increases, decreases

b) Increases, increases, increases

c) Decreases, decreases, decreases

d) Decreases, decreases, increases