(Part I) The Farmer Corporation is considering investing in a new manufacturing machine that has an estimated life of five years. The cost of the machine is $40,000 and the machine will be depreciated straight line over its five-year life to a residual value of $0. The manufacturing machine will result in sales of $50,000 in year 1. Sales are estimated to grow by 6% each year. It is estimated that the Farmer Corporation needs to hold 5% of its annual sales in cash, 10% of its annual sales in accounts receivable, 15% of its annual sales in inventory, and 20% of its annual sales in accounts payable. What is the required net working capital in the first year for this project? Multiple Choice
(Part I) The Farmer Corporation is considering investing in a new manufacturing machine that has an estimated life of five years. The cost of the machine is $40,000 and the machine will be
Multiple Choice
$-1,500.
$0.
$2,500.
$5,000.
$10,000.
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