TLCEnterprises Just Revised Its Capital Structure from a Debt-Equity Ratio

question 16

Multiple Choice

T.L.C.Enterprises just revised its capital structure from a debt-equity ratio of .37 to a debt-equity ratio of .48.The firm's shareholders who prefer the old capital structure should:

• A)sell some shares and hold the sale proceeds in cash.
• B)sell all of their shares and loan out the entire sale proceeds.
• C)do nothing.
• D)sell some shares and loan out the sale proceeds.
• E)borrow funds and purchase more shares.

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Definitions:

Foreign Exchange Loss

A financial loss experienced by a company due to changes in exchange rates affecting foreign currency transactions.

Non-Interest-Bearing Note

A financial instrument or loan that does not accrue interest over time, requiring the borrower to repay only the principal amount.

U.S. Dollar Equivalent

The U.S. Dollar Equivalent is the amount of foreign currency expressed in terms of the value of the United States dollar, based on the current exchange rate.

Put Option

A financial instrument that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.