Samuels Manufacturing is considering the purchase of a new machine to replace one it believes is obsolete. The firm has total current assets of $910,000 and total current liabilities of $645,000. 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	+$38,000
Marketable securities	0
Inventories	18,000
Accounts payable	+86,000
Notes payable	0
Accounts receivable	+147,000
Cash	+16,000

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 $____(Round to the nearest dollar.)

Part 2

b. Explain why a change in these current accounts would be relevant in determining the initial investment for the proposed capital expenditure.(Select from the drop-down menus.) Analysis of the purchase of a new machine reveals

an increase

a decrease

in net working capital. This

decrease

increase

should be treated as an initial outlay and is a cost of acquiring the new machine.

Part 3

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.(Select from the drop-down menus.)

Yes

No

, in computing the terminal cash flow, the net working capital

increase

decrease

should be reversed.