Question

1. It is January 2nd and senior management of Chester 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 ($36.54) and leverage changes to 2.7. Which of the following statements are true?

Select all that apply. Select: 3

Total liabilities will be $141,982,854

Chester will issue stock totaling $2,740,500

Working capital will remain the same at $14,142,934

The total investment for Chester will be $21,208,369

Total assets will rise to $222,039,332

2. The statement of cash flows for Baldwin Company shows what happens in the Cash account during the year. It can be seen as a summary of the sources and uses of cash (sources of cash are added, uses of cash are subtracted). Please answer which of the following is true if Baldwin makes plant improvements:

Select: 1 It is a source of cash and will be shown in the financing section as an addition.

It is a use of cash, and will be shown in the financing section as a subtraction.

It is a source of cash, and will be shown in the investing section as an addition.

It is a use of cash, and will be shown in the investing section as a subtraction.

Answer 1