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:

Financing Activity

refers to the transactions related to raising capital and paying back investors, such as issuing debt or equity.

Statement Of Cash Flows

A financial statement showing the cash inflows and outflows for a business over a period of time, divided into operating, investing, and financing activities.

Repurchasing Capital Stock

A corporate action in which a company buys back its own shares from the marketplace, reducing the amount of outstanding stock.

Negative Free Cash Flow

A situation where a company's cash outflows exceed its cash inflows during a specific period, indicating potential financial difficulties.