Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Change in net working capital calculationSamuels Manufacturing is considering the purchase of a new machine to replace one it believes is obsolete. The firm has

Change in net working capital calculationSamuels Manufacturing is considering the purchase of a new machine to replace one it believes is obsolete. The firm has total current assets of

$918,000

and total current liabilities of

$646,000.

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

Change

Accruals

+$39,000

Marketable securities

0

Inventories

19,000

Accounts payable

+94,000

Notes payable

0

Accounts receivable

+152,000

Cash

+18,000

a. Using the information given, calculate any change 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 flows? Explain.

a. The change in net working capital is

$

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting The Impact On Decision Makers

Authors: Gary A Porter, Curtis L Norton

7th Edition

1439080526, 9781439080528

More Books

Students also viewed these Finance questions