It is January 2nd and senior management of Chester meets to determine their inve
ID: 2802499 • Letter: I
Question
It is January 2nd and senior management of Chester meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing $10,000,000 in bonds. Assume the bonds are issued at face value and leverage changes to 2.7. Which of the following statements are true? Select all that apply.
Select: 3
Total liabilities will be $146,603,223
Chester’s long-term debt will rise by $9,000,000
Total Assets will rise to $246,118,606
Working capital will remain the same at $18,455,529
The total investment for Chester will be $227,758,262
Suppose the Digby company expands to other markets with good designs, high awareness and easy accessibility, what strategy would they be implementing?
Select: 1
Broad differentiation
Niche differentiation
Niche cost leader
Broad cost leader
It is January 2nd and senior management of Chester meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing $10,000,000 in bonds. Assume the bonds are issued at face value and leverage changes to 2.7. Which of the following statements are true? Select all that apply.
Select: 3
Total liabilities will be $146,603,223
Chester’s long-term debt will rise by $9,000,000
Total Assets will rise to $246,118,606
Working capital will remain the same at $18,455,529
The total investment for Chester will be $227,758,262
Explanation / Answer
a) Total Assets (given) - Total Liabilities (given) = Total Stockholders' Equity
$246,118,606-$146,603,223= $99,515,383
Leverage= 2.7
New stock issued = $10,000,000
Total Stockholders' Equity (above) - New stock issued (above) = Old Stock
$99,515,313 - $10,000,000= $89,5151,313
Total Assets / Total Stockholders' Equity = Leverage
246,118,606/ 99,515,383= 2.47
Therefore, None of the statements are true.
b) Suppose the Digby company expands to other markets with good designs, high awareness and easy accessibility, what strategy would they be implementing?
Broad Differentiation strategy should be implemented by Digby.
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