(1) According to the Static Tradeoff Theory, what is the benefit of a firm issuing debt and what are the costs of a firm issuing debt? In 2017, the US government lowered corporate income tax rates significantly, based on the Static Tradeoff Theory, how would the lower corporate tax rates impact corporations optimal D/A ratios? Explain!

(2) As a financial analyst for a toy manufacturer you have analyzed the opportunity to outsource the manufacturing to Thailand. You have just learned that the Thai government may enact new regulation causing more risk and uncertainty to this investment opportunity. Write a brief memo (3-4 sentences) to the CFO describing how you would adjust your NPV analysis for the additional risk associated with this investment opportunity (in the memo provide an explanation for your adjustment and be as specific as possible).