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

question 48

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 600 shares,and you disagree with this decision to delever the firm.You can undo the effect of this decision by:

• A) Borrow $6,000 and buy 240 shares of stock
• B) Sell 240 shares of stock and lend $6,000
• C) Borrow $9,000 and buy 360 shares of stock
• D) Sell 360 shares of stock and lend $9,000

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Definitions:

Improvement Index

A quantitative measure or indicator that tracks the degree of improvement in performance, process, or outcome over time.

Minimization Problem

A type of optimization problem aimed at finding the lowest possible value of a function within a given set of constraints.

Reallocation

The process of redistributing or reassessing resources, assets, or positions within an organization, system, or portfolio to optimize performance or efficiency.

Transportation Problem

A logistical issue involving the optimal distribution of goods or services from several sources to several destinations.