Halka Company is a no-growth firm. Its sales vary seasonally, causing net assets to differ from $320,000 to $410,000; however fixed assets remain constant at $260,000. If the firm follows a maturity matching (or moderate) working capital financing policy, then what is the most likely total of long-term debt plus equity capital?
a. $260,642
b. $274,360
c. $288,800
d. $304,000
e. $320,000
Lower total asset range $320,000
Upper total asset range $410,000
Minimum total + Min. CA = $320,000 = LT Debt + Equity
A maturity matching policy implies that the fixed assets and permanent current assets are financed with the long-term sources. This is its most probable level of long-term financing.