Use the Information for the Question(s)below

question 77

Multiple Choice

Use the information for the question(s) below.
Epiphany Industries is considering a new capital budgeting project that will last for three years. Epiphany plans on using a cost of capital of 12% to evaluate this project. Based on extensive research, it has prepared the following incremental cash flow projects:

-A firm is considering changing their credit terms. It is estimated that this change would result in sales increasing by $1 000 000. This in turn would cause inventory to increase by $150 000, accounts receivable to increase by $100 000, and accounts payable to increase by $75 000. What is the firm's expected change in net working capital?

• A)$325 000
• B)$175 000
• C)$250 000
• D)$1 175 000

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Definitions:

Statistical Process Control

A method of quality control which employs statistical methods to monitor and control a process, helping ensure that the process operates at its fullest potential.

Variation

The measure of dispersion in a dataset, showing how much individual data points differ from the mean.

Special Causes

Unusual, non-random factors that cause variability in a process, distinct from common causes.

Common Causes

Natural variations in a process, which are constant and inherent in the system over time, as opposed to special causes that are unusual or not part of the process.