JJJ Corp Has $10 Million in Assets and Is Currently Financed

question 78

Multiple Choice

JJJ Corp. has $10 million in assets and is currently financed with 100 percent equity. The firm decides to switch to a 60 percent equity/40 percent debt structure and decides to sell $4 million of debt and use the proceeds to retire $4 million in equity today. This is an example of:

• A) underinvestment.
• B) active capital structure management.
• C) Modigliani-Miller theorem in practice.
• D) none of the options.

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Definitions:

Business Proposition

A value statement that outlines why a customer should buy a product or use a service, essentially defining the purpose and benefits of the business.

Industrial Product

Goods or services sold from one business to another for the production of other goods or services, rather than for direct consumption by the consumer.

Conviction Stage

is a phase in the sales process where the potential customer develops a strong belief in the value and benefits of the product, leading towards a purchase decision.

Salesperson's Goal

The primary objective of a salesperson, which typically involves meeting or exceeding specific sales targets or quotas within a set timeframe.