Effect of Additional Debt on EV

This problem tests core corporate finance intuition about enterprise value, capital structure, and the relationship between debt and cash. Candidates need to understand why enterprise value is designed to measure the value of the operating business independent of how it is financed, and how changes to the balance sheet can offset each other in theory. Interviewers ask this kind of question to see whether you can reason through valuation definitions cleanly and distinguish between the textbook treatment of EV and the practical effects that financing decisions can have on operating performance and investor perception.