Question 4 You just invested in a company buying 300 shares of equity. The company has 3000 shares outstanding and is all equity financed with a share price of 50 NOK. The management is planning to issue debt and re-purchase shares in order to attain a debt-to-equity ratio of 1. Assume that you can invest or borrow at the same interest rate paid by the company on its debt. Assume perfect capital markets and no taxation. Which one of the following portfolios would guarantee you the same cash flow as in the of all-equity case. (a) Sell 150 shares and lend the proceeds at the market interest rate (b) Buy 300 additional shares by borrowing the equivalent amount at the market interest rate (c) Buy 150 additional shares by borrowing the equivalent amount at the market interest rate (d) None of the above (e) I choose not to