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