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

question 93

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 100 shares,and you disagree with this decision to delever the firm.You can undo the effect of this decision by:

• A)borrowing $1500 and buying 60 shares of stock.
• B)selling 32 shares of stock and lending $800.
• C)borrowing $1000 and buying 40 shares of stock.
• D)selling 40 shares of stock and lending $1000.

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Definitions:

Machinery

Physical devices or machines, often powered, that are used in manufacturing processes or to perform various tasks in industries.

Collateral

Assets pledged by a borrower to secure a loan or credit, which can be seized by the lender if the borrower defaults on the repayment terms.

Venture Capital Firms

Companies that invest in startups and early-stage companies with high growth potential in exchange for equity.

Loan

A sum of money borrowed that is expected to be paid back with interest.