An increase in the change in net working capital - 71220

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  • From: Business,
  • Posted on: Thu 07 Aug, 2014
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An increase in the change in net working capital for a project indicates that additional financing is needed to fund the increase in current assets.

Which of the following concerning short-term financing methods is NOT true?
A. Under the line of credit agreement, a client-firm is guaranteed to take out a loan up to a certain level.
B.Short-term bank loans typically do not require assets as collateral.
C. All of the above are true.
D. Accruals and accounts payables do not carry explicit interest charges.
D. Firms generally have little control over the level of accruals.

Falcon Cement, Inc. buys on terms of 2/15, net 30. It does not take discounts, and it typically pays 60 days after the invoice date. Net purchases amount to $720,000 per year. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?
A. 16.55%
B. 10.86%
C. 13.41%
D. 12.07%
E. 14.90%

For a typical firm, which of the following sequences is CORRECT? All rates are after taxes, and assume that the firm operates at its target capital structure. (ks = cost of retained earnings; ke = cost of new common stock)

A. WACC > ke > ks > kd
B. ke > ks > kd > WACC
C. ke > ks > WACC > kd
D. kd > ke > ks > WACC
E. WACC > kd > ks > ke

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