True or False? Briefly explain.

a) “No real problems can arise from management retaining a high level of positive net working capital in a firm. It will simply provide the firm with flexibility to pursue new positive NPV decisions.”

b) “In the case where a levered firm acquires an unlevered firm, the acquiring firm can immediately use the additional borrowing capacity resulting from the acquisition to avoid a transfer of wealth from its stockholders to bondholders.”