Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Change in net working capital calculation Samuels Manufacturing is considering the purchase of a new machine to replace one it believes is obsolete. The firm
Change in net working capital calculation Samuels Manufacturing is considering the purchase of a new machine to replace one it believes is obsolete. The firm has total current assets of $929,000 and total current liabilities of $635,000. 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 Accruals Marketable securities Inventories Accounts payable Notes payable Accounts receivable Cash Change +$37,000 0 - 18,000 +91,000 0 + 145,000 + 13,000 a. Using the information given, calculate any change in net working capital that is expected to result from the proposed replacement action. a. The change in net working capital is $. (Round to the nearest dollar.) 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 v in net working capital. This should be treated as an initial outlay and is a cost of acquiring the new machine. 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.) in computing the terminal cash flow, the net working capital should be reversed. Fnter your answer in the answer box
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started