Jessica Invested in Quantro Stock When the Firm Was Unlevered

question 13

Multiple Choice

Jessica invested in Quantro stock when the firm was unlevered.Since then,Quantro has changed its capital structure and now has a debt-equity ratio of 0.30.To unlever her position,Jessica needs to:

• A)borrow some money and purchase additional shares of Quantro stock.
• B)maintain her current equity position as the debt of the firm did not affect her personally.
• C)sell some shares of Quantro stock and hold the proceeds in cash.
• D)sell some shares of Quantro stock and loan out the sale proceeds.
• E)create a personal debt-equity ratio of 0.30.

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Definitions:

Subtract Fractions

The operation of taking one fraction away from another, which involves finding a common denominator and then subtracting the numerators.

Simplest Form

Simplest form refers to expressing a mathematical expression or fraction in its most reduced terms, with no common factors between the numerator and the denominator.

Multiplicative Inverse

Another term for reciprocal; a number which, when multiplied by the original number, yields the multiplicative identity (1).

Negative Integer

An integer less than zero, represented by a negative sign (-) in front of a positive number.