Assume That Net Working Capital and All of the Costs

question 31

Multiple Choice

Assume that net working capital and all of the costs of Fake Stone, Inc. increase directly with sales. Also assume that the tax rate and the dividend payout ratio are constant. The firm is currently operating at full capacity. What is the external financing need if sales increase by 4 percent?

• A)-$1,214.48
• B)-$804.15
• C)-$397.19
• D)$201.16
• E)$525.38

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Definitions:

Monopolistic Seller

A market scenario where a single seller dominates the market, having substantial control over the prices and the supply of a product or service.

Purely Competitive

A market structure characterized by many buyers and sellers, where no single entity can influence the market price.

Resource Demand

The desired quantity of a resource that businesses and individuals are willing and able to consume at a given price.

Demand Factors

Elements that influence the quantity of a product or service consumers are willing to buy at a given price, such as income levels, tastes, and price of substitutes.