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 calculated as the increase in inventory plus the increase in accounts receivable minus the increase in accounts payable. Inventory increases by $128,000, accounts receivable increases by 10% of $80,000, which is $8,000, and accounts payable increases by $45,000. Therefore, the initial cash flow needed is $128,000 + $8,000 - $45,000 = $91,000.

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