Lance Owns 200 Shares of ABC Stock with a Current

question 30

Multiple Choice

Lance owns 200 shares of ABC stock with a current market value of $10 a share. ABC has an annual EBIT of $400,000 and a cost of debt of 8%. Currently, ABC is 100% equity financed with
100,000 shares outstanding. ABC is going to a 25% debt capital structure by issuing debt and
Redeeming shares. Ignore taxes. What does Lance have to do to return his capital structure position
To approximately its original position?

• A) Sell 69 shares and lend the money at 8%.
• B) Sell 187 shares and lend the money at 8%.
• C) Borrow $1,870 and buy an additional 187 shares.
• D) Borrow $690 at 8% and buy an additional 69 shares.
• E) Sell 50 shares and loan the money at 8%.

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Definitions:

Normative Need

Refers to what is considered a standard or essential requirement in a society to ensure the well-being and functioning of its members.

Drinking Water

Water that is safe for human consumption, free from contaminants and harmful bacteria.

Water Resources

The natural sources of water available for human use, including lakes, rivers, aquifers, and rainwater, crucial for survival, agriculture, and industry.

Social Justice

Social justice is the concept of fair and just relations between the individual and society, measured by the distribution of wealth, opportunities for personal activity, and social privileges.