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(Answered) Change-in-Net-Working-Capital-Calculation


Samuels Manufacturing is considering the purchase of a new machine to replace one they feel is obsolete. The firm has total current assets of $920,000 and total current liabilities of $640,000. As a result of the proposed replacement, the following changes are anticipated in the levels of the current asset and current liability accounts noted.;Account Changes;Accruals +$40,000;Marketable 0;Inventories --$10,000;Account Payable +$90,000;Notes Payable 0;Account receivable + 150,000;Cash + 15,000;a. Using the information given, calculate the change, if any, in net working capital that is expected to result from the proposed replacement action.;b. Explain why a change in these current accounts would be relevant in determining the initial investment for the proposed capital expenditure.;c. Would the change in net working capital enter into any of the other cash flow components that make up the relevant cash flow? Explain.
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Change-in-Net-Working-Capital-Calculation

 


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