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

---

Definitions:

Liquidity

Refers to the ease with which assets can be converted into cash without significant loss of value.

Asset Management

The systematic process of developing, operating, maintaining, and selling assets in a cost-effective manner.

Debt Financing

The raising of funds through borrowing, typically by issuing bonds or taking out loans, as opposed to equity financing.

Liquidity

The ease with which an asset can be converted into cash without significantly affecting its market price.