Use the Information for the Question(s) Below

question 6

Multiple Choice

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 for each of the three years. The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant. The canes have a cost per unit to manufacture 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 30% tax bracket and has a cost of capital of 10%
-The required net working capital in the first year for the Sisyphean Corporation's project is closest
to:

• A) $3600
• B) $5400
• C) $3960
• D) $2880

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Definitions:

Group Selection

A theory in evolution proposing that natural selection operates on groups, not just individuals, for the survival benefit of the group.

Forage

The act of searching for and exploiting food resources in the environment by animals.

Monogamy Hypothesis

The theory suggesting that monogamy is favored in certain environments as it enhances offspring survival through biparental care.

Haplodiploidy Hypothesis

A genetic mechanism explaining the evolved social behavior in certain species, where males are haploid and females are diploid.