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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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