Use the Information for the Question(s)below

question 40

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 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 first year for the Sisyphean Corporation's project is closest to:

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

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Definitions:

Actual Financial Loss

A monetary loss that can be quantified or accurately measured, resulting from specific events like theft or litigation.

Negligent

Describes a failure to exercise the care that a reasonably prudent person would exercise in like circumstances, leading to unintended damage or harm.

Actually Named Third Parties

Specific individuals or entities explicitly mentioned in a legal document or contract, distinguishing them from those not directly named.

Liability Theory

In law and finance, a concept that outlines the conditions under which an individual or entity can be held legally responsible for an action or event leading to damage or loss.