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Suppose that HomeNets products are direcly shipped from the manufacturer to HomeNets customers , who will pay directly the manufacturer . HomeNet expects 15% of
Suppose that HomeNets products are direcly shipped from the manufacturer to HomeNets customers , who will pay directly the manufacturer . HomeNet expects 15% of annual sales of $ 13,000,000 to be on credit , whereas it expects that it will owe to its manufacturers 15% of 5,500,000 of goods sold. How does the above information affect a projects free cash flows with a 4 years life?
\begin{tabular}{|l|l|r|r|r|r|r|} \hline 1 & Year & 0 & 1 & 2 & 3 & 4 \\ \hline 2 & Net Working Capital & 0 & 1,125 & 1,125 & 1,125 & 1,125 \\ \hline 3 & Change in NWC & & +1,125 & 0 & 0 & 0 \\ \hline 4 & Cash Flow Effect & & 1,125 & 0 & 0 & 0 \\ \hline \end{tabular}Step by Step Solution
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