Determining the amount of money to borrow

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Reference no: EM132071705

1. Determining the amount of money to borrow in order to finance a 20-year project is a capital structure decision.

True

False

2. Given the following information: current assets = $400; fixed assets = $400; long-term debt = $455; equity = $300; sales = $470; costs = $400; tax rate = 34%. Suppose that assets and costs maintain a constant ratio to sales. What is the total external financing needed if sales increase 25%? Assume the firm pays no dividends.

a. $143.75

b. $142.25

c. $183.75

d. $167.25

e. $380.25

Reference no: EM132071705

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