Question

Jeff's Stereos is expanding its product offerings which includes increasing the floor inventory by $150,000, increasing accounts receivable by $35,000, and increasing its debt to suppliers by $75,000. The company will also spend $200,000 for a building contractor to expand the size of the showroom. What is the amount of the project's initial cash flow?

Answer 1

Answer:

$310,000

Explanation:

The computation of the projected initial cash flow is shown below:

Project's initial cash outflow= Increased inventory + increased accounts receivable - increased debt + spending amount for the expansion of the size of the showroom

= $150,000 +  $35,000 -  $75,000 +  $200,000

= $310,000

We simply applied the above formula to find out the initial cash flow