Franklin Industries Has a Current Net Working Capital of $2

question 64

Multiple Choice

Franklin Industries has a current net working capital of $2.5 million.It expects that this will grow at a rate of 3.5% annually forever.If it could slow that growth to 3% per year,how would that affect the the value of the firm,given that it has a cost of capital of 11%?

• A)a decrease of $2.22 million
• B)an increase of $12,500
• C)an increase of $0.78 million
• D)an increase of $2.08 million

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Definitions:

Current Account

A component of a country's balance of payments that includes the balance of trade, net income from abroad, and net current transfers.

Double-Entry Bookkeeping

An accounting practice that ensures every transaction affects two accounts, maintaining the balance of the accounting equation.

Foreign Currency

Money or currency used in another country, differing from one's own domestic currency.

Exchange Rate

The rate at which one currency can be exchanged for another currency.