1) Below are the estimated current assets and current liabilities of the new dealership for the first two years.

Year 1 Inventory 473,000 Accounts payable 202,000

Year 2 Inventory 568,000 Accounts payable 202,000 What is the change in net working capital in year 2? The cash flow at year 2 = $___________

2) Mary currently owns a Ford car dealer in Hagerstown, MD. Her team has noticed that many of their new customers live in Chambersburg, PA. They believe that there is an opportunity for expansion. Her team spent a significant amount of time discussing the possibility of opening a new dealership in Chambersburg, PA, but could not decide. Mary estimated that the cost of discussion has reached $30,000 due to loss of productivity for her team; So he decided to hire I and T consulting firm for $50,000 to survey the area and estimate the demand. The consulting firm has provided some estimations. The consulting firm also recommends renovation of Hagerstown office with an estimated cost of $500,000 regardless of how Mary will decide on the new dealership.

Classify whether the following cashflows are relevant or irrelevant to the project for opening a new car dealership at Chambersburg.

Options = Relevant OR Irrelevant

Cost of discussion $30,000 Consulting firm $50,000 Construction cost of $1,000,000 at Chambersburg location. Equipment cost 1.5 million Number of cars sold at Chambersburg 100 fewer cars sold at Hagerstown Cost of car sold at Chambersburg $2000 lower cost at Hagerstown Renovation cost of $500,000 at Hagerstown location