A company taking on more debt does not automatically alter its market cap. There is no automatic correlation for any given valuation metric, whether we're talking about how high a PE ratio should be, or how debt should be valued when deciding if a market cap is reasonable.
Your 1) item rests on the efficient market theory, which is false.
It is entirely up to investors - their reasoning and emotion - and it typically varies significantly from one industry to another, and from one company to another. For some companies, taking on debt will not alter the market cap what-so-ever. Apple for example, viewed as an extremely healthy company with massive earnings, can take on debt without it denting their market cap in a negative way.
