T.L.C.Enterprises just revised its capital structure from a debt-equity ratio of 0.30 to a debt-equity ratio of 0.45.The firm's shareholders who prefer the old capital structure should:
A)sell some shares and hold the sale proceeds in cash.
B)sell all of their shares and loan out the entire sale proceeds.
C)do nothing.
D)sell some shares and loan out the sale proceeds.
E)borrow funds and purchase more shares.

Question

Quizplus · Accepted Answer

Shareholders who prefer the old capital structure can sell some shares and loan out the sale proceeds to replicate the old debt-equity ratio on a personal level.

TLCEnterprises Just Revised Its Capital Structure from a Debt-Equity Ratio