A company is an over levered public company, with two classes of shares. Since the insiders (who run the company) own the voting shares, the company has the luxury of decreasing its debt ratio gradually over time. Which of the following actions will benefit the company in this endeavor?

a. Taking new investments predominantly with stock

b. Buying back stock

c. Increasing dividends per share

d. Cutting dividends per share

You are an activist investor looking to put pressure on companies that have accumulated too much cash to return cash to stockholders. Which of the following companies would you put the most pressure on to return cash? (You can assume that they all have a cost of capital of 10% and an optimal debt ratio of 40%)

a. Company A: ROC = 25%, Actual debt ratio = 40%

b. Company C: ROC = 25%, Actual debt ratio = 10%

c. Company D: ROC = 5%, Actual debt ratio = 40%

d. Company E: ROC =5%, Actual debt ratio = 60%

e. Company F: ROC = 5%, Actual debt ratio = 10%