Principles of Corporate Finance
13th Edition
ISBN: 9781260465099
Author: BREALEY, Richard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 6, Problem 9PS
Summary Introduction
To determine: The net working capital and the cash flows due to investment in working capital.
Net working capital is the difference between current asset and current liabilities.
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Students have asked these similar questions
the following table tracks the main components of net working capital over the life of a 4-year project. calculate the investment in net working capital in year 3. in the presented answers, a negative number represents a cash outflow (additional investment) and a positive number represents a cash inflow (recapture of a previous investment).
year 1
year 2
year 3
year 4
year 5
Accounts receivable
0
156,000
231,000
196,000
0
inventory
78,000
133,000
133,000
98,000
0
accounts payable
26,500
51,500
53,000
36,500
0
Explain why net operating working capital is included in a capital budgeting analysis andhow it is recovered at the end of a project’s life.
Please help me find the Net cash flows of the project for each year and the NPV of the project using excel.
Chapter 6 Solutions
Principles of Corporate Finance
Ch. 6 - Cash flows Which of the following should be...Ch. 6 - Cash flows Reliable Electric, a major Ruritanian...Ch. 6 - Prob. 3PSCh. 6 - Prob. 4PSCh. 6 - Real and nominal flows Mr. Art Deco will be paid...Ch. 6 - Real and nominal flows Restate the net cash flows...Ch. 6 - Real and nominal flows Guandong Machinery is...Ch. 6 - Working capital Each of the following statements...Ch. 6 - Prob. 9PSCh. 6 - Project NPV Better Mousetraps research...
Ch. 6 - Project NPV A widget manufacturer currently...Ch. 6 - Project NPV Marsha Jones has bought a used...Ch. 6 - Project NPV United Pigpen is considering a...Ch. 6 - Project NPV Imperial Motors is considering...Ch. 6 - Project NPV and IRR A project requires an initial...Ch. 6 - Taxes and project NPV In the International Mulch...Ch. 6 - Depreciation and project NPV Suppose that Sudbury...Ch. 6 - Depreciation and project NPV Ms. T. Potts, the...Ch. 6 - Prob. 20PSCh. 6 - Prob. 21PSCh. 6 - Prob. 22PSCh. 6 - Equivalent annual cash flow Look at Problem 22...Ch. 6 - Equivalent annual cash flow Deutsche Transport can...Ch. 6 - Prob. 25PSCh. 6 - Mutually exclusive investments and project lives...Ch. 6 - Mutually exclusive investments and project lives...Ch. 6 - Mutually exclusive investments and project lives....Ch. 6 - Mutually exclusive investments and project lives...Ch. 6 - Mutually exclusive investments and project lives...Ch. 6 - Replacement decisions Machine C was purchased five...Ch. 6 - Replacement decisions Hayden Inc. has a number of...Ch. 6 - Replacement decisions. You are operating an old...Ch. 6 - Replacement decisions. A forklift will last for...Ch. 6 - The cost of excess capacity The presidents...Ch. 6 - Effective tax rates One measure of the effective...Ch. 6 - Equivalent annual costs We warned that equivalent...
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- Estimate the required net operating working capital (NOWC) for each year and the cash flow due to changes in NOWC.arrow_forward1. Determine the weighted average cost of capital (WACC) for Vigour Pharmaceuticals 2. Calculate the initial cash flow of the project. 3. Calculate the operating cash-flows for all years of the project.arrow_forwardThe following table tracks the main components of working capital over the life of a four-year project. Accounts receivable Inventory Accounts payable Net working capital Cash flows 2019 2019 0 95,000 35,000 2021 2020 2022 190,000 265,000 230,000 150,000 150,000 115,000 60,000 70,000 45,000 Calculate net working capital and the cash inflows and outflows due to investment in working capital. (Negative answers should be indicated by a minus sign.) 2020 2021 2023 0 0 0 2022 2023arrow_forward
- The Net Present Value considers which of the following inputs: The internal rate of return The accounting rate of return The initial amount investment The annual accounting profit throughout the project’s operating life.arrow_forwardThe following table tracks the main components of working capital over the life of a four-year project. 2021 2022 2023 2024 2025 Accounts receivable 0 174,000 249,000 214,000 0 Inventory 87,000 142,000 142,000 107,000 0 Accounts payable 31,000 56,000 62,000 41,000 0 Calculate net working capital and the cash inflows and outflows due to investment in working capital.arrow_forwardWhat does each of the following definitions refer to: The comparison of the expected future streams of earnings from a project, with the immediate and subsequent streams of expenditure. All aspects of the administration of cash, accounts receivables, inventory, accounts payable, short term debt, accrued expenses, etc. 3. The specific mixture of long-term debt and equity the firm uses to finance its operationsarrow_forward
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- This refers to the sum of project’s first cost and the present worth of all costs for replacement, operation and maintenance for a long time or forever. a. Rate of return on additional investment b. Annual cost c. Capitalized cost d. Present worth costarrow_forwardBelow are expected current assets and current liabilities (in million dollars) of a new project. Year 0 1 2 3 4 Inventory 12 16 17 18 14 Accounts payable 5 2 7 9 6 What is cash flow as a result of change in net working capital at year 2?arrow_forwardCalculate NOPAT, Net operting Working capital, Capital expenditure and free cash flow for 2021arrow_forward
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