During the coming year, Gold & Gold wants to increase its free cash flow by $180 million, which should result in a higher EVA and stock price.The CFO has made these projections for the upcoming year:
What increase in net working capital (in millions of dollars) would enable the firm to meet its target increase in FCF?
Definitions:
Allocative Efficiency
Allocative efficiency occurs when resources are distributed in a way that maximizes the net benefit to society, matching consumer preferences with production.
Productive Efficiency
A state where an economy or entity is operating in such a way that it cannot produce more of one good without reducing the output of another good.
Minimum ATC
The lowest point on the average total cost curve, representing the most efficient scale of production.
Purely Competitive Market
An idealized market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to perfect competition.
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