EBK FUNDAMENTALS OF CORPORATE FINANCE
EBK FUNDAMENTALS OF CORPORATE FINANCE
9th Edition
ISBN: 9781260049237
Author: BREALEY
Publisher: MCGRAW HILL BOOK COMPANY
Question
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Chapter 19, Problem 1QP

a.

Summary Introduction

To describe: How paying out an extra $2 million in cash dividend will affect cash and net working capital of the company D.

a.

Expert Solution
Check Mark

Explanation of Solution

Paying out extra 2 million in cash dividend will decrease both the cash and the working capital by $2 million.

b.

Summary Introduction

To describe: How customer paying out $2,500 bill will affect cash and net working capital of the company D.

b.

Expert Solution
Check Mark

Explanation of Solution

Customer paying $2,500 bill from previous sale will result in increase of $2,500 in cash and leaves the working capital unchanged.

c.

Summary Introduction

To describe: How paying $5,000 to one of the suppliers will affect cash and net working capital of the company D.

c.

Expert Solution
Check Mark

Explanation of Solution

The company paying its bill payable of $5,000 to one of the suppliers will decrease the cash of $5,000 and leaves the net working capital unchanged.

d.

Summary Introduction

To describe: How borrowing one million $ in long term and investing the proceeds in inventory will affect cash and net working capital of the company D.

d.

Expert Solution
Check Mark

Explanation of Solution

The company borrowing one million $ in long term and investing the proceeds in inventory will leave the cash unchanged and increase the net working capital by $1 million.

e.

Summary Introduction

To describe: How borrowing one million $ in short term and investing the proceeds in inventory will affect cash and net working capital of the company D.

e.

Expert Solution
Check Mark

Explanation of Solution

The company borrowing one million $ in short term and investing the proceeds in inventory will leave the cash unchanged and leave the net working capital unchanged.

f.

Summary Introduction

To describe: How selling $5 million of marketable securities for cash will affect cash and net working capital of the company D.

f.

Expert Solution
Check Mark

Explanation of Solution

Selling a company’s $5 million of marketable securities for cash will increase $ 5 million in cash and leave the net working capital unchanged.

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