Question: After reporting your findings to the company management Study Problem
After reporting your findings to the company management (Study Problem), the company CFO suggested that they could purchase raw materials in advance for future delivery. This would involve paying for the raw materials today and taking delivery as the materials are needed. Through the advance purchase plan the cost of raw materials would be $0.90 per unit. How does this new plan affect your cash flow estimates? How should the advance payment for the raw materials enter into your analysis of project cash flows?
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