Franklin Industries Has a Current Net Working Capital of $1

question 24

Multiple Choice

Franklin Industries has a current net working capital of $1 million.It expects that this will grow at a rate of 3% annually forever.What growth rate in working capital would the firm require in order to achieve a $2 million increase in firm value,given that it has a cost of capital of 7%?

• A)2%
• B)2.7%
• C)3.3%
• D)1.4%
• E)4%

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Definitions:

Projection

A defense mechanism where individuals attribute their own undesirable thoughts, feelings, or motives onto someone else.

Defence Mechanism

Psychological strategies brought into play by individuals to protect themselves from unacceptable thoughts or feelings.

Critical

Having a crucial or decisive importance in the success, failure, or existence of something.

Loving

An intense feeling of deep affection, care, and attachment towards someone or something, often characterized by emotional warmth and a desire for close bonds.