Change in net working capital calculation Samuels Manufacturing is considering the purchase of a new machine to
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Change in net working capital calculationSamuels Manufacturing is considering the purchase of a new machine to replace one it believes is obsolete. The firm has total current assets of $ comma and total current liabilities of $ comma 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
plus $ comma
Marketable securities
Inventories
negative comma
Accounts payable
plus comma
Notes payable
Accounts receivable
plus comma
Cash
plus comma
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 cash flow 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.
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
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