Brennan's Boats is considering a project which will require additional inventory of $128,000 and will also increase accounts payable by $47,000 as suppliers are willing to finance part of these purchases. Accounts receivable are currently $85,000 and are expected to increase by 10% if this project is accepted. What is the initial project cash flow needed for net working capital?
A) $88,000
B) $79,500
C) $96,500
D) $190,300
E) $190,500

Question

Quizplus · Accepted Answer

The initial project cash flow needed for net working capital is calculated as follows:

Increase in inventory = $128,000
Increase in accounts payable = ($47,000)
Increase in accounts receivable = 10% of $85,000 = $8,500

Therefore, the initial project cash flow needed for net working capital is:

$128,000 - $47,000 + $8,500 = $89,500

The closest option to this value is C, which is $96,500.

Brennan's Boats Is Considering a Project Which Will Require Additional