Nu Look Needs to Maintain 15% of Its Sales in Net

question 230

Multiple Choice

Nu Look needs to maintain 15% of its sales in net working capital. The store manager is considering a 3-year project which is expected to increase sales from the current level of $1.1 million to $1.3 million the first year and $1.5 million a year for the following two years. What amount should be included in the project analysis as the net working capital cash flow for year 3? Assume that all accounts are restored to their original values at the end of year 3.

• A) -$20,000
• B) $0
• C) $20,000
• D) $30,000
• E) $60,000

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