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question 91

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Use the information for the question(s) below.
The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years.The cost of the machine is $30,000 and the machine will be depreciated straight line over its three-year life to a residual value of $0.
The cane manufacturing machine will result in sales of 2000 canes in year 1.Sales are estimated to grow by 10% per year each year through year three.The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant.The canes have a manufacturing cost of $9 each.
Installation of the machine and the resulting increase in manufacturing capacity will require an increase in various net working capital accounts.It is estimated that the Sisyphean Corporation needs to hold 2% of its annual sales in cash,4% of its annual sales in accounts receivable,9% of its annual sales in inventory,and 5% of its annual sales in accounts payable.The firm is in the 21% tax bracket,and has a cost of capital of 10%.
-The change in Net working capital from year one to year two is closest to:

Definitions:

Overestimate

To estimate or judge something to be larger, greater, or of higher importance than it actually is.

Overestimate

To assess something as larger or more important than it actually is; making an assessment that exceeds the true dimensions or scope.

Electronic Medium

A form of communication or media that utilizes electronic technology for disseminating information, such as the internet or digital television.

Psychological Control

The manipulation of someone else's psychological and emotional state to influence their behavior, often in a negative way.