Use the Information for the Question(s)below

question 9

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 using the straight-line method over its three-year life to a residual value of $0.
The cane manufacturing machine will result in sales of 2 000 canes in year 1. Sales are estimated to grow by 10% per year for each of the three years. The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant. The canes have a cost per unit to manufacture 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 30% tax bracket and has a cost of capital of 10%.
-The change in net working capital from year 1 to year 2 is closest to:

• A)an increase of $396
• B)a decrease of $360
• C)a decrease of $396
• D)an increase of $360

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Definitions:

Pavlov

Renowned for his work in classical conditioning, signifying the learning process through which a neutral stimulus becomes associated with a meaningful stimulus.

Meat Powder

A stimulus used in Pavlov's experiment to evoke the salivation response in dogs, demonstrating classical conditioning.

Immediate Reinforcer

A reward that occurs directly following a behavior, which increases the likelihood of the behavior being repeated in the future.

Good Behavior

Actions that are considered to be in accordance with societal or specific setting standards, often rewarded or looked upon favorably.