Question

A new project would require an immediate increase in raw materials in the amount of $17,000. The firm expects that accounts payable will automatically increase $7,000. How much must the firm expect its investment in net working capital to increase if they accept this project?
A.) $17,000
B.) $7,000
C.) $10,000
D.) $24,000

Answer 1

Answer:

C.) $10,000

Explanation:

Working capital is the net of current asset and current liabilities. it is a financial measure that gives insight into how liquid a company is.

Raw materials also known as Inventory and accounts payable are both current assets and current liabilities respectively hence, Incremental investment in working capital if the project is accepted

= $17,000 - $7,000

= $10,000

Answer 2

Answer:

increase in net working capital = $10,000

Explanation:

given an increase in raw materials amount = $17,000 being Current assest

accounts payable automatically increase = $7,000 being Current liabilities

To know what the net working capital to increase is

Solution

The net working capital is express as this

net working capital = Current assets - Current liabilities      

so

increase in net working capital =  $17000 - $7000

increase in net working capital = $10,000

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