1. You have just bought (on margin) 100 shares of Gazprom Corp. common stock for $108 per share. One year from now you expect to sell the stock for $140. The interest charge will be 9%. What return do you expect to earn on your investment? (Show all work. Ignore commissions.)
2. Why should managers consider the conditions in the stock and bond markets when they are trying to make capital structure decisions?
High debt ratio raises the threat of bankruptcy. How can firms avoid this threat?