Use the Following Information to Answer the Question(s)below

question 93

Multiple Choice

Use the following information to answer the question(s) below.
Galt Industries has 50 million shares outstanding and a market capitalization of $1.25 billion.It also has $750 million in debt outstanding.Galt Industries has decided to delever the firm by issuing new equity and completely repaying all the outstanding debt.Assume perfect capital markets.
-Suppose you are a shareholder in Galt industries holding 100 shares,and you disagree with this decision to delever the firm.You can undo the effect of this decision by:

• A)borrowing $1500 and buying 60 shares of stock.
• B)selling 32 shares of stock and lending $800.
• C)borrowing $1000 and buying 40 shares of stock.
• D)selling 40 shares of stock and lending $1000.

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Definitions:

Net Loss

The amount by which expenses exceed revenues, indicating that a business spent more than it earned during a period.

End-of-period Spreadsheet

An end-of-period spreadsheet is a tool used in accounting to compile all account balances at the end of a reporting period for review and adjustment.

Common Stock

Common Stock denotes an equity interest in a corporation, providing voting rights and entitling the holder to a share of the company’s success through dividends and capital appreciation.

End-of-period Spreadsheet

A comprehensive worksheet that summarizes all accounts and balances at the end of an accounting period to facilitate the preparation of financial statements.