Response to the following:
1. Duever Co. (a U.S. ?rm) noticed that its ?nancial leverage was substantially lower than that of most successful ?rms in Germany and Japan in the same industry. Is Duever's capital structure less than optimal?
2. Atlanta, Inc., has a large subsidiary in Venezuela, where interest rates are very high and the currency is expected to weaken. Assume that Atlanta per- ceives the country risk to be high. Explain the tradeoff involved in ?nancing the subsidiary with local debt versus an equity investment from the parent.