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

question 53

Multiple Choice

Use the following information to answer the question(s) below.
d'Anconia Copper is an all-equity firm with 60 million shares outstanding,which are currently trading at $20 per share.Last month,d'Anconia announced that it will change its capital structure by issuing $300 million in debt.The $200 million raised by this issue,plus another $200 million in cash that d'Anconia already has,will be used to repurchase existing shares of stock.Assume that capital markets are perfect.
-Suppose you are a shareholder in d'Anconia Copper holding 500 shares,and you disagree with the decision to lever the firm.You can undo the effect of this decision by:

• A)borrowing $2000 and buying 100 shares of stock.
• B)selling 100 shares of stock and lending $2000.
• C)borrowing $1200 and buying 60 shares of stock.
• D)selling 60 shares of stock and lending $1200.

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Definitions:

Trial Balance

A financial report that lists all accounts and their balances at a specific point in time, ensuring that debits equal credits.

General Ledger Accounts

Individual accounts in the general ledger that record all transactions of a company, used to prepare financial statements.

Liquidity

The simplicity of turning an asset into cash without impacting its market value.

Long-Term Investments

Assets that a company intends to hold for more than one year, including stocks, bonds, real estate, and other financial investments.