Bryan invested in Bryco, Inc. stock when the ﬁrm was ﬁnanced solely with equity. The ﬁrm is now utilizing debt in its capital structure. To unlever his position, Bryan needs to:
A) Borrow some money and purchase additional shares of Bryco stock.
B) Maintain his current position as the debt of the ﬁrm did not affect his personal leverage position.
C) Sell some shares of Bryco stock and hold the proceeds in cash.
D) Sell some shares of Bryco stock and loan it out such that he creates a personal debt- equity ratio equal to that of the ﬁrm.
E) Create a personal debt-equity ratio that is equal to exactly 50% of the debt-equity ratio of the ﬁrm.

Question

Quizplus · Accepted Answer

The Answer of Bryan invested in Bryco, Inc. stock when the ﬁrm was ﬁnanced solely with equity. The ﬁrm is now utilizing debt in its capital structure. To unlever his position, Bryan needs to:
A) Borrow some money and purchase additional shares of Bryco stock.
B) Maintain his current position as the debt of the ﬁrm did not affect his personal leverage position.
C) Sell some shares of Bryco stock and hold the proceeds in cash.
D) Sell some shares of Bryco stock and loan it out such that he creates a personal debt- equity ratio equal to that of the ﬁrm.
E) Create a personal debt-equity ratio that is equal to exactly 50% of the debt-equity ratio of the ﬁrm.

Bryan Invested in Bryco, Inc