Answer:
A) Prepaying the debt would cause the firm's debt-to-equity ratio to improve from .62 to .50.
Explanation:
The computation of the impact is as follows:
The Debt equity ratio is 
= Total liabilities ÷ total equity
Now 
Debt equity prior to payment is
 = $16,000,000 ÷ $26,000,000 
= 0.62
And, 
Debt equity after payment is 
= $13,000,000 ÷ $26,000,000 
= 0.50
So here as we can see that the debt equity would be improved from 0.62 to 0.50
Therefore the correct option is a.