Beranek Corp

question 20

Multiple Choice

Beranek Corp. has $410,000 of assets, and it uses no debt--it is financed only with common equity. The new CFO wants to employ enough debt to bring the debt/assets ratio to 40%, using the proceeds from the borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio?

• A) $155,800
• B) $164,000
• C) $172,200
• D) $180,810
• E) $189,851

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Definitions:

Strangers

Individuals who are not known personally or are unfamiliar.

Ingratiation

A psychological technique aimed at making oneself more likable to others through flattery, favors, or compliance to their wishes.

Compliment

A polite expression of praise or admiration.

Favor

An act of kindness beyond what is due or usual.