Use the Information for the Question(s)below

question 91

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 change in Net working capital from year one to year two is closest to:

• A)A decrease of $360.
• B)An increase of $360.
• C)An increase of $396.
• D)A decrease of $396.

---

Definitions:

Applied Behavior Analysis

A therapy based on the science of learning and behavior, aiming to improve specific behaviors and skills through reinforcement techniques.

Positive Reinforcements

A process in behaviorism where a behavior is strengthened and more likely to be repeated by following it with a desirable outcome or reward.

Undesirable Behaviors

Actions or responses that are considered negative or unwanted within a given context or society.

Operant Conditioning

A method of learning that occurs through rewards and punishments for behavior, through which an individual makes associations between a particular behavior and a consequence.