Question: 4. 16-3 Restructuring Strategy Suppose that Lil John Industries equity is currently sell- ing for $27 per share and that 2 million shares are outstanding.

4. 16-3 Restructuring Strategy Suppose that Lil John Industries equity is currently sell- ing for $27 per share and that 2 million shares are outstanding. The firm also has 50,000 bonds outstanding, which are selling at 103 percent of par. If Lil John was considering an active change to its capital structure so that the firm would have a D/E of 1.4, which type of security (stocks or bonds) would it need to sell to accomplish this, and how much would the firm have to sell? (LG16-1)

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