A New Project Would Require an Immediate Increase in Raw

question 31

Multiple Choice

A new project would require an immediate increase in raw materials in the amount of $12,000. The firm expects that accounts payable will automatically increase $8,500. How much must the firm expect its investment in net working capital to change if they accept this project?

• A) +$20,000
• B) +$3,500
• C) −$20,500
• D) −$3,500

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Definitions:

Incremental Sales

The additional sales generated from a specific marketing campaign, promotional offer, or product launch, distinguishing these sales from the base level of sales.

Required Return

The minimum rate of return an investor expects to receive from an investment, considering the risk involved.

Arbitration

A form of alternative dispute resolution where a neutral third party makes a decision on a dispute outside the court system.