Suppose a firm is all$-$equity financed and the share price is $$40.$ An investor's optimal

holding is $8$ shares. The firm then decides to refinance by issuing risk$-$free debt $($i$.$e$.$D $=$

$0)$ worth $25\%$ of its total value and using this to repurchase $25\%$ of its stock. What

should the investor do if she wishes to ensure that the outlook of her investment is

unaffected by the refinancing? $($Assume the MM propositions hold.$)$

A$.$ Continue to hold $8$ shares

B$.$ Sell $2$ shares and buy $$80$ of debt

C$.$ Borrow $$80$ and buy a further $2$ shares

D$.$ None of the above