Project Cash flow, Addition of product
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3 questions
1) All of the following are anticipated effects of a proposed project. Which of these should be included in the initial project cash flow related to net working capital?
a) an inventory decrease of $5000
b) an increase in accounts receivable of $1500
C)an increase in fixed assets of $7600
d) a decrease in accounts payable of $2100.
2) Joseph's & Co. purchase a corner lot in Eglon City five years ago at a cost of $640,000. The lot was recently appraised at $810,000. At the tiem of the purchase, the company spent $50,000 to grade the lot and another $4,000 to build a small building on the lot to house a parking lot attendant who has overseen the use of the lot for daily commuter parking. The company now wants to build a new retail store on the site. The building cost is estimated at $1.2 million. What amount should be used as the initial cash flow for this building project?
3) Walks Softly, Inc sells customized shoes. Currently, it sells 10, 000 pairs of shoes annually at an average price of $68 a pair. It is considering adding a lower-priced line of shoes which sell $49 a pair. Walks softly estimates it can sell 5,000 pairs of the lower-priced shoes but will sell 1,000 less pairs of the higher-priced shoes by dong so. What is the amount of the sales that should be used when evaluating the addition of the lower-priced shoes?
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Solution Summary
Answers 3 questions on Initial project cash flow related to net working capital, Initial Cash flow for a building project and decision regarding addition of a lower priced line of shoes.
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1) All of the following are anticipated effects of a propose project. Which of these should be included in the initial project cash flow related to net working capital?
a) an inventory decrease of $5000
b) an increase in accounts receivable of $1500
C)an increase in fixed assets of $7600
d) a decrease in accounts payable of $2100.
Answer: All except C (an increase in fixed assets of $7600) should be included in the initial project cash flow
Inventory, accounts receivable and accounts payable are part of working ...
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