Question
The management of the local cotton mill is evaluating the replacement of low-wage workers by automated machines. If this project is adopted, production and sales
The management of the local cotton mill is evaluating the replacement of low-wage workers by automated machines. If this project is adopted, production and sales are expected to increase significantly: Norma Rae, the mill's financial analyst, expects cash will have to increase by $8,000 and the accounts receivable will increase by $10,000 in response to the increase in sales volume. Because of the higher level of production, inventory will have to increase by $12,000, with an associated $6,000 increase in accounts payable. Accrued taxes and wages, even with the decrease in the number of laborers, are estimated to increase by $2,500.
Calculate the change in net working capital if the automation project is adopted.
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