1. Random Company has $50 million worth of debt outstanding. Following a recent economic downturn, the value of the firms assets decreased to $70 million. The company would like to purchase Golden Goose company for $40 million. However, Random Company has insufficient cash, and will need to raise external capital. The company is currently listed on the stock exchange. 55% of the firms shares outstanding are held by shareholders who are friendly to the firms management, although management is worried about a growing group of dissatisfied shareholders who are planning on pushing for the replacement of the firms management and board of directors.

1. What considerations would the companys management need to take into account when determining between debt and equity to finance the new acquisition. In your answer make reference to the firms debt-to-equity ratio, horizon of the investment, and other strategic considerations.

1. Explain the reasons why companies choose to be listed on a stock exchange. In your answer make reference to the benefits and costs of listing?