You Are Considering Adding a Microbrewery onto One of Your

question 110

Multiple Choice

You are considering adding a microbrewery onto one of your firm's existing restaurants.This will entail an increase in inventory of $8000,an increase in accounts payables of $2500,and an increase in property,plant,and equipment of $40,000.All other accounts will remain unchanged.The change in net working capital resulting from the addition of the microbrewery is:

• A)$45,500
• B)$10,500
• C)$6,500
• D)$5,500

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Definitions:

Cost of Debt

The cost of debt is the effective interest rate a company pays on its debts, including loans and bonds, accounting for tax benefits.

Equity Financed

Refers to raising capital for a company through the sale of shares in the company to investors.

Tax Rate

The portion of one's income or a company's earnings attributed to taxes.

Current Rate

The present value of a financial instrument or the latest interest rate on a loan or investment.