Q1: Governments often step in to protect large companies that get into financial troubles and bail them out. If this is an acceptable practice, what effect would you expect it to have on the debt ratios of firms and why? Q2: You are advising Oil Company in Brazil. The firm is in a high-growth stage and looking at the optimal way to finance itself. Looking at the companies across the globe, it concludes that a significant protection of its capital should come from debt. Is this conclusion justified? Why and Why not? Q3: Why is it so important to note that the required return is not a historical cost of fund? Cite two factors that can render the use of a firm's historical cost of funds to evaluate a new investment to be potentially damaging to the firm? Q4: In what sense is subordinated debt advantageous to senior debt holders, and in what sense is it disadvantageous to them