JJJ Corphas $10 Million in Assets and Is Currently Financed with with 100

question 27

Multiple Choice

JJJ Corp.has $10 million in assets and is currently financed with 100 percent equity.The firm decides to switch to a 60 percent equity/40 percent debt structure and decides to sell $4 million of debt and use the proceeds to retire $4 million in equity today.This is an example of:

• A)underinvestment.
• B)active capital structure management.
• C)Modigliani-Miller theorem in practice.
• D)none of these.

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Definitions:

Color-Blind

The inability to discern certain shades of color or, in some cases, any color at all.

Conscious Supervision

This term refers to the deliberate and aware monitoring and guiding of processes or activities, often by someone in a position of authority.

Perception

The cognitive process that interprets and makes sense of the information gathered through the senses, forming our awareness of the environment.

Awareness

The knowledge or perception of a situation or fact; consciousness about something.