A company needs to raise $400 million and is deciding between an equity offering and a debt offering. Its stock is currently trading at an all-time high, and interest rates have recently increased significantly. What would an investment banker most likely recommend?

Why B — An equity offering because the high stock price minimizes dilution, and rising interest rates make debt more expensive

When a company's stock is trading at or near all-time highs, an equity offering allows the company to raise capital with minimal dilution because fewer shares need to be issued at the higher price. Simultaneously, rising interest rates increase the cost of debt financing, making equity relatively more attractive on a cost-of-capital basis. While the decision involves many factors (tax implications, debt capacity, investor base, market conditions), the combination of peak stock price and elevated interest rates generally favors equity issuance.