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yaroslaw [1]
2 years ago
6

The Buck Store is considering a project that will require additional inventory of $216,000 and will increase accounts payable by

$181,000. Accounts receivable are currently $525,000 and are expected to increase by 9 percent if this project is accepted. What is the project's initial cash flow for net working capital
Business
1 answer:
Anestetic [448]2 years ago
5 0

Answer:

$607,250 outflow

Explanation:

Net Working Capital is the amount of money needed to maintain operations on a day to day basis.

Net Working Capital = Current Assets - Current Liabilities

where,

<u>Current Assets are calculated as :</u>

Inventory                                                        $216,000

Accounts Receivable ($525,000 x 1.09)   $575,250

Total                                                                $788,250

and

Current Liabilities = $181,000

therefore,

Net Working Capital = $788,250 - $181,000 = $607,250

Conclusion

The project's initial cash flow for net working capital is $607,250 outflow.

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Consider a project to supply Detroit with 20,000 tons of machine screws annually for automobile production. You will need an ini
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Answer:

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initial investment = $3,000,000 + $300,000 = $3,300,000

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total contribution margin = $150 x 20,000 = $3,000,000

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depreciation expense per year = $750,000

tax rate = 38%

required return rate = 18%

after tax salvage value = $280,000 x (1 - 38%) = $173,600

NCF₀ = -$3,300,000

NCF₁ = [($3,000,000 - $850,000 - $750,000) x 0.62] + $750,000 = $1,618,000

NCF₂ = $1,618,000

NCF₃ = $1,618,000

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IRR = 36.36%

b) our best case scenario:

expected revenue = 20,000 tons x $660 = $13,200,000 per year

initial investment = $2,550,000 + $285,000 = $2,835,000

contribution margin per unit = $660 - $450 = $210

total contribution margin = $210 x 20,000 = $4,200,000

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required return rate = 18%

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NCF₂ = $2,319,250

NCF₃ = $2,319,250

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IRR = 74.34%

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initial investment = $3,450,000 + $315,000 = $3,765,000

contribution margin per unit = $540 - $450 = $90

total contribution margin = $90 x 20,000 = $1,800,000

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3 0
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If per capita gdp in 2014 was $900, in 2015 was $1,000, and in 2016 was $1,200, the growth rate of per capita gdp between 2014 a
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Answer:

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