ABC Co currently is an all equity firm with 20,000 shares of stock outstanding at a market price of $40 a share. ABC Co has decided to add leverage to its financial operations by issuing a $400,000 of debt at a 9% interest rate. This $400,000 will be used to repurchase shares of stock. You own 3,000 shares of ABC Co stock. You can borrow and lend funds at a 9%. How many of your shares of stock in ABC Co must you sell to offset the leverage that the firm is assuming? Assume that you loan out all of the funds you receive from the sale of your stock.

a. 600

b. 1,250

c. 2,000

d. 1,500

e. 750