A levered firm has only 2 assets on its balance sheet with the below market values and CAPM betas. The risk free rate is 3% pa and the market risk premium is 5% pa. Assume that the CAPM is correct and all assets are fairly priced.

Selected Company Details
Item	Market value ($m)	Beta
Cash asset	0.5	0
Truck asset	0.5	2
Loan liabilities	0.25	0.1
Equity funding	?	?

The firm then pays $0.5m cash for trucks that are actually worth $0.2m on the market. Assume that the beta and yield on the existing loan liabilities are unchanged compared to before. All figures are given to 6 decimal places. Which of the following statements is NOT correct? This event led to a:

Select one:

a.

Bad outcome for the company since the NPV of buying the trucks was -$0.3m.

b.

Unchanged market and book value of equity.

c.

$0.2m increase in the market value of trucks to $0.7m and a $0.5m increase to the book value of trucks to $1m, assuming the accountant doesnt write-down the value yet.

d.

$0.5m decrease in the market and book value of cash to zero.

e.

$0.30 decrease in the stock price to $0.45 assuming that there are 1 million shares.