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question 64

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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 required net working capital in the second year for the Sisyphean Corporation's project is closest to:


Definitions:

Societal Analysis

Societal analysis is the examination of a society's structures, relationships, and institutions to understand its complexities, dynamics, and the factors that drive changes within it.

Economic Productivity

measures the efficiency of production in an economy, often calculated as the ratio of output to inputs in the production process.

Inflation

The economic condition characterized by a general increase in prices and fall in the purchasing value of money.

Quintile Distribution

A statistical measure used to divide a population into five equal groups based on a particular variable, such as income.

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