Grady-White Boats, Inc. is considering a project that will require additional inventory of $1,129,000 In addition, pursuing this project will also increase accounts payable by $450,000 as suppliers are willing t finance part of these purchases. Accounts receivable are currently $800,000 and are expected to increase by 10% if this project is accepted. The firm's cash requirements are not anticipated to change What is the incremental change to net working capital as a result of accepting this project? OA. $1,479,000 OB. $1,659,000 OC. $759,000 O D. $599,000 OE. $1,499,000

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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**Grady-White Boats, Inc. Project Evaluation**

Grady-White Boats, Inc. is evaluating a project that will require an additional inventory investment of $1,129,000. Additionally, the project will lead to an increase in accounts payable by $450,000, as suppliers are agreeable to finance part of these purchases. The current accounts receivable stand at $800,000 and are anticipated to rise by 10% if the project is approved. The firm's cash requirements are projected to remain unchanged.

**Question:**
What is the incremental change to net working capital as a result of accepting this project?

**Options:**

- A. $1,479,000
- B. $1,659,000
- C. $759,000
- D. $599,000
- E. $1,499,000

**Explanation:**

To calculate the incremental change in net working capital, consider the inventory increase, accounts payable change, and the adjustment in accounts receivable. The overall effect on the net working capital will be determined by adding the increase in inventory to the increase in accounts receivable, and then subtracting the increase in accounts payable.
Transcribed Image Text:**Grady-White Boats, Inc. Project Evaluation** Grady-White Boats, Inc. is evaluating a project that will require an additional inventory investment of $1,129,000. Additionally, the project will lead to an increase in accounts payable by $450,000, as suppliers are agreeable to finance part of these purchases. The current accounts receivable stand at $800,000 and are anticipated to rise by 10% if the project is approved. The firm's cash requirements are projected to remain unchanged. **Question:** What is the incremental change to net working capital as a result of accepting this project? **Options:** - A. $1,479,000 - B. $1,659,000 - C. $759,000 - D. $599,000 - E. $1,499,000 **Explanation:** To calculate the incremental change in net working capital, consider the inventory increase, accounts payable change, and the adjustment in accounts receivable. The overall effect on the net working capital will be determined by adding the increase in inventory to the increase in accounts receivable, and then subtracting the increase in accounts payable.
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