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

question 10

Multiple Choice

Use the following information to answer the question(s) below.
Galt Industries is trading for $20 per share and has 25 million shares outstanding. Galt Industries has a debt-equity ratio of 0.4 and its debt is zero coupon debt with a ten year maturity and a yield to maturity of 8%.
-Which of the following best describes Galt's debt using a put option?

• A) Long $200 million in risk free debt and Short a put option with a $200 strike price
• B) Short $200 million in risk free debt and Long a put option with a $200 strike price
• C) Long $200 million in risk free debt and Short a put option with a $700 strike price
• D) Short $200 million in risk free debt and Long a put option with a $700 strike price

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Definitions:

Intersegment Sales

Transactions of goods or services between segments of the same company, which are used for internal accounting purposes.

Consolidated Revenue

The total revenue recognized from the combined operations of a parent company and its subsidiaries, after inter-company transactions have been eliminated.

Revenue Test

A criterion used to determine whether a business segment or component qualifies as a reportable segment based on its revenue amount, either internally or externally generated.