Question

The Sisyphean Corporation is considering investing in a new
machine that has an estimated life of three years. The cost of the
machine is $50,000 and the machine will be depreciated straight
line over its three-year life to a residual value of $0. The
machine will result in sales of 3,000 widgets in year 1. Sales are
estimated to grow by 9% per year each year through year three. The
price per widget that Sisyphean will charge its customers is $19
and is to remain constant. The widgets have a cost per unit to
manufacture of $9 each. Installation of the machine and the
resulting increase in manufacturing capacity will require an
increase in various net working capital accounts. It is estimated
that the Sisyphean Corporation needs to hold 2% of its annual
revenues in cash, 10% of its annual revenues in accounts
receivable, 10% of its annual revenues in inventory, and 10% of its
annual revenues in accounts payable. The firm is in the 27% tax
bracket, and has a cost of capital of 7%. What is the required
investment in net working capital in the
** second** year of operations?

Answer #1

The Sisyphean Corporation is considering investing in a new cane
manufacturing machine that has an estimated life of three years.
The cost of the machine is $30,000 and the machine will be
depreciated straight line over its three-year life to a residual
value of $0.
The cane manufacturing machine will result in sales of 2000 canes
in year 1. Sales are estimated to grow by 10% per year each year
through year three. The price per cane that Sisyphean will...

The Sisyphean Corporation is considering investing in a new cane
manufacturing machine that has an estimated life of three years.
The cost of the machine is $30,000 and the machine will be
depreciated straight line over its three-year life to a residual
value of $0.
The cane manufacturing machine will result in sales of 2400 canes
in year 1. Sales are estimated to grow by 9% each year through year
3. The price per cane that Sisyphean will charge its...

5. The Mallard Corporation is considering investing in a new
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value of $0. The machine will result in increased sales of 2000
canes in year 1. Sales are estimated to grow by 10% per year each
year through year three. The price per cane that the corporation...

The Virginia Cane Company (VCC) is considering investing in a
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In the first year, VCC expects to...

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over 3 years using straight line depreciation. Its original
installation cost was $15,000.
The old machine has been in use for 2 years, and it can be
traded in for $3,500.
The new machine will be purchased $24,000 and it will also be
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Woodland Corporation purchased a printing machine three (3)
years ago and is considering replacing it with a new one which is
faster and easier to operate. The old machine has been
depreciated over 3 years using straight line depreciation. Its
original installation cost was $15,000. The old machine
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3. Woodland Corporation purchased a printing machine three (3)
years ago and is considering replacing it with a new one which is
faster and easier to operate. The old machine has been depreciated
over 3 years using straight line depreciation. Its original
installation cost was $15,000. The old machine has been in use for
2 years, and it can be traded in for $3,500.
The new machine will be purchased $24,000 and it will also be
depreciated over 3 years...

XYZ Company is considering whether a project requiring the
purchase of new equipment is worth investing. The cost of a new
machine is $340,000 including shipping and installation. The
project will increase annual revenues by $400,000 and annual costs
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Your firm is considering producing a new variety of widget. You
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the widgets at a cost of $90,000. You estimate sales will be
$500,000 in the first year, $800,000
in the second year, $500,000 in the third year, and zero after
three years.
To produce the new widgets will require an investment in working
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Net working capital will be 20% of sales in years 1 and 2.
Labor, materials, and...

XYZ Company is considering whether a project requiring the
purchase of new equipment is worth investing. The cost of a new
machine is $340,000 including shipping and installation. The
project will increase annual revenues by $400,000 and annual costs
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