1. When a portion of the firm’s current assets are financed with long-term liabilities, the firm has a
a. negative net working capital
b. None of the choices are correct
c. is using more aggressive strategy
d. is in insolvency
e. has a positive net working capital
2. It is January 2nd and senior management of Baldwin meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing 75,000 shares of stock plus a new bond issue. Assume the stock can be issued at yesterday’s stock price ($37.61) and leverage changes to 2.7. Which of the following statements are true? Select all that apply. Select: 3
1. Working capital will remain the same at $16,296,930
2. Total liabilities will be $121,082,334
3. The total investment for Baldwin will be $208,600,464
4. Equity will be $84,697,379
5. Baldwin will issue stock totaling $2,820,750
6. Total Assets will rise to $221,066,899