Following questions are short answers that can total to 10 points each:

1. Assume that Tesla is planning to build a battery manufacturing factory in a Southeast Asian country, but it is concerned that the host government may take over its business in the future. Which strategies can Tesla use to minimize this country risk? When doing capital budgeting for this business project, how should Tesla adjust for the host government risk?

2. To minimize the cost of capital (i.e., cost of equity and cost of debt), multinationals try to optimize their capital structure which can be explained by a number of theories. What are they? Discuss in detail one of these theories.