Capsim Management Simulations, Inc.® 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 $10,000,000 in bonds. Assume the bonds are issued at face value and leverage changes to 2.7.

Which of the following statements are true? Select all that apply.

a) Total liabilities will be $132,709,346.

b) The total investment for Baldwin will be $12,728,474.

c) Working capital will remain the same at $12,936,641.

d) Baldwin's long term debt will rise by $10,000,000.

e) Total assets will rise to $212,378,526.

Question

Foxy Lady

Business

28 May, 07:38

Capsim Management Simulations, Inc.® 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 $10,000,000 in bonds. Assume the bonds are issued at face value and leverage changes to 2.7.

Which of the following statements are true? Select all that apply.

a) Total liabilities will be $132,709,346.

b) The total investment for Baldwin will be $12,728,474.

c) Working capital will remain the same at $12,936,641.

d) Baldwin's long term debt will rise by $10,000,000.

e) Total assets will rise to $212,378,526.

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Answers (1)

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Landin Levy · Answer 1

Statement (a), (d) and (e) are true.

Explanation:

According to the scenario, computation of the given data are as follows:-

According to the statement (a) Total Liabilities = $132,709,346

According to the statement (e) Total Assets rise=$212,378,526

Total Stockholder's Equity = Total Assets - Total Liabilities

= $212,378,526 - $132,709,346

= $79,669,180

Leverage = Total Assets : Total Stockholder's Equity

= $212,378,526 : $79,669,180

= 2.7

According to the statement (d) Baldwin's Long Term Debt will rise by $10,000,000.

According to the analysis, statement (a), (d) and (e) are true.