Faraway Fabricators, Inc , is considering the expansion of its welding and stamping division and estimates that this will require the firm 's accounts receivable to increase by 12 percent of the added sales Moreover, Faraway estimates that inventories will be 15 percent of the added cost of goods s...

a Faraway Fabricators needs additional working capital if it expands its welding and stamping divisi ...

Faraway Fabricators, Inc., is considering the expansion of its welding and stamping division and estimates that this

Question:

Faraway Fabricators, Inc., is considering the expansion of its welding and stamping division and estimates that this will require the firm's to increase by 12 percent of the added sales. Moreover, Faraway estimates that inventories will be 15 percent of the added cost of goods sold, while will be 10 percent of that added cost. The firm's CFO estimates that its sales and cost of goods sold over the five-year estimated life of the investment are as follows:

a. What are the (operating) working-capital requirements of the project for Years 1 through 5? You can assume that the expenditure for operating net working capital for Year 1 is made in Year 0 and so forth.
b. How much additional money must Faraway invest annually because of its working capital requirements?

Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...