Kay's Nautique is considering a project which will require additional inventory of $128,000 and will also increase accounts payable by $45,000 as suppliers are willing to ﬁnance part of these
Purchases. Accounts receivable are currently $80,000 and are expected to increase by 10% if this
Project is accepted. What is the initial project cash ﬂow needed for net working capital?

Question

Quizplus · Accepted Answer

The initial project cash flow needed for net working capital is:
= increase in current assets – increase in current liabilities
= (new inventory + new accounts receivable – current accounts receivable) – (new accounts payable – current accounts payable)
= (($128,000) + (10% × $80,000) – $80,000) – ($45,000 – 0)
= $12,000
Thus, the initial project cash flow needed for net working capital is $12,000, which is closest to choice B, $91,000.

Kay's Nautique Is Considering a Project Which Will Require Additional