A company is considering purchasing a new machine, at a cost of $50,000. This amount will be written off over 5 years at $10,000 per year. The company will have to increase its accounts receivable by $4,000 in the first year. The disposal value of the machine being replaced is $1,500. What is the initial working capital investment required?
A) $54,000
B) $52,500
C) $36,000
D) $4,000
E) $2,500

Question

Quizplus · Accepted Answer

The initial working capital investment required is the increase in accounts receivable, which is $4,000. The cost of the machine and disposal value are not part of the working capital calculation.

A Company Is Considering Purchasing a New Machine, at a Cost