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Miller's Dry Goods is an all-equity firm with 50,000 shares of stock outstanding at a market price of $40 a share. The company's earnings before

Miller's Dry Goods is an all-equity firm with 50,000 shares of stock outstanding at a market price of $40 a share. The company's earnings before interest and taxes are $142,000. Miller's has decided to add leverage to its financial operations by issuing $500,000 of debt at 6 percent interest and using the proceeds to repurchase shares of stock. You own 500 shares of Miller's stock and can loan out funds at 6 percent interest. How many shares of Miller's stock must you sell to offset the leverage that Miller's is assuming? (Assume you loan out all of the funds you receive from the sale of stock. Ignore taxes.)

133 shares
100 shares
125 shares
148 shares
150 shares

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