Determine the Change in Net Working Capital That Appears Warranted

question 94

Essay

Determine the change in net working capital that appears warranted for the following proposed project: Inventory levels will increase 20% from their current value of $500,000; cash will increase by $25,000; wage accruals will increase by $60,000; machinery will increase by $75,000; accounts receivable-because of a new collection system-will increase by only $15,000; accounts payable will increase by $45,000. What happens to net working capital at the end of the project's life?

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Definitions:

Bonds

Fixed income investments representing a loan made by an investor to a borrower, typically corporate or governmental, that pays back with interest.

Par Value

The stated value or face amount of a bond, stock share, or coupon as declared by the issuing entity.

Journal Entry

A record in the books of accounts that notes the details of a financial transaction.

Semiannual Interest

Interest that is calculated and paid twice a year, often used in bond and loan agreements.