You act as an external consultant to Santos. Your task is to review the company’s currentcapital structure and make a report to the board of directors for a recommendation to improvethe firm’s capital...

You act as an external consultant to Santos. Your task is to review the company’s currentcapital structure and make a report to the board of directors for a recommendation to improvethe firm’s capital structure. You can decide to perform this task in two steps. First, you willanalyse the past five capital structure policies implemented by the company. Second, you willselect one comparison firm to see in what aspects Santos can further improve their capitalstructure.1. Using the 5 years of financial data from Santos explain which of the competing theoriesof capital structure covered in the unit best explains the firm’s observed debt and equitylevels; (7 marks)2. The COVID-19 outbreak officially announced in January 2020 presentedunprecedented economic damages on businesses around the world. Discuss how theCOVID-19 pandemic has impacted Santos’s capital structure in 2020. Do you think thefirm’s capital structure policy during the pandemic is plausible? Provide yourjustification. (7 marks)3. Decide on one comparison firm in the same industry and of similar total assets toSantos. Based on your analysis on the comparison firm, recommend with justificationone alternative capital structure that the firm could undertake to reduce its cost ofcapital. (8 marks