A firm has prepared the coming
A firm has prepared the coming year’s pro forma balance sheetand has estimated that external financing required would be$1,030,000. The firm should prepare tox`
A) repurchase common stock totaling $1,030,000.
B) arrange for a loan of $1,030,000.
C) do nothing; the balance sheet balances.
D) invest in marketable securities totaling $1,030,000
Answer:
B arrange for a loan of $ 1030,000
Since the firm requires external financing, the firm needs toarrange for additional funds. Hence it should arrange for a loan ofthe equivalent amount.
Repurchasing common stock and investing in marketable securitieswill reduce the funds further. Doing nothing is not the solutionsince the balance sheet will not balance.
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