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5. Bryan invested in Bryco stock when the firm was financed solely with equity. The firm...

5. Bryan invested in Bryco stock when the firm was financed solely with equity. The firm now has a debt-equity ratio of .3. To maintain the same level of leverage he originally had, Bryan needs to: discount rate which the firm should apply to all of the projects it undertakes. [Hint: Bryan could do a homemade leverage] A. borrow some money and purchase additional shares of Bryco stock. B. maintain his current position in Bryco stock. C. Sell some shares of Bryco stock and hold the proceeds in cash. D. sell some shares of Bryco stock and loan out the proceeds.

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Answer #1

Option D is correct

sell some shares of Bryco stock and loan out the proceeds.

Explanation:

As Bryco stock is now leveraged and earlier is was not leveraged, Bryan has to deleverage his position by selling some shares and loan out the proceeds.

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