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In: Finance

A firm has prepared the coming year's pro forma balance sheet and has estimated that external...

A firm has prepared the coming year's pro forma balance sheet and 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

Solutions

Expert Solution

B arrange for a loan of $ 1030,000

Since the firm requires external financing, the firm needs to arrange for additional funds. Hence it should arrange for a loan of the equivalent amount.

Repurchasing common stock and investing in marketable securities will reduce the funds further. Doing nothing is not the solution since the balance sheet will not balance.

jeff jeffy answered 2 years ago
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