Question

Sales for year 2 of a new project are expected to increase by
12.50%. For every dollar increase in sales, current assets are
expected to increase by 19.70% and current liabilities by 5.65%.
For year 2, calculate the change in net working capital as a
percentage of year 1 sales.

Answer #1

Let sales in year 1 be $100

So, when Sales for year 2 of a new project are expected to increase by 12.5%

Sales in year 2 = 100*(1 + 0.125) = $112.50

So, dollar increase in sales = sales in year 2 - sales in year 2 = 112.50 - 100 = $12.50

For every dollar increase in sales, current assets are expected to increase by 19.70% and current liabilities by 5.65%

So, dollar increase in current asset = dollar increase in sales*(1+increase in current assets) = 12.5*(1+0.197) = $14.96

Similarly, dollar increase in current liabilities = dollar increase in sales*(1+increase in current liabilities) = 12.5*(1+0.0565) = $13.20

So, change in net working capital = Increase in current assets - increase in current liabilities = 14.96 - 13.20 = 1.76

So, change in net working capital as a percentage of year 1 sales = Change in NWC/sales in year 1 = 1.76/100 = 1.76%

Option E is correct.

Sales for year 2 of a new project are expected to increase by
12.50%. For every dollar increase in sales, current assets are
expected to increase by 19.70% and current liabilities by 5.65%.
For year 2, calculate the change in net working capital as a
percentage of year 1 sales.

Sales for year 2 of a new project are expected to increase by
11.50%. For every dollar increase in sales, current assets are
expected to increase by 18.70% and current liabilities by 5.15%.
For year 2, calculate the change in net working capital as a
percentage of year 1 sales.

Sales for year 2 of a new project are expected to increase by
19.50%. For every dollar increase in sales, current assets are
expected to increase by 26.70% and current liabilities by 9.15%.
For year 2, calculate the change in net working capital as a
percentage of year 1 sales.

Sales for year 2 of a new project are expected to increase by
14.00%. For every dollar increase in sales, current assets are
expected to increase by 21.20% and current liabilities by 6.40%.
For year 2, calculate the change in net working capital as a
percentage of year 1 sales.

Sales for year 2 of a new project are expected to increase by
10.00%. For every dollar increase in sales, current assets are
expected to increase by 17.20% and current liabilities by 4.40%.
For year 2, calculate the change in net working capital as a
percentage of year 1 sales.
options: 1.18%
1.22%
1.25%
1.28%
1.31%

Sales for year 2 of a new project are expected to increase by
13.50%. For every dollar increase in sales, current assets are
expected to increase by 20.70% and current liabilities by 6.15%.
For year 2, calculate the change in net working capital as a
percentage of year 1 sales.
Question 2 options:
1.77%
1.82%
1.87%
1.92%
1.96%

Sales for year 2 of a new project are expected to increase by
16.50%. For every dollar increase in sales, current assets are
expected to increase by 23.70% and current liabilities by 7.65%.
For year 2, calculate the change in net working capital as a
percentage of year 1 sales.
Question 5 options:
2.65%
2.71%
2.78%
2.85%
2.91%

Sales for year 2 of a new project are expected to increase by
14.00%. For every dollar increase in sales, current assets are
expected to increase by 21.20% and current liabilities by 6.40%.
For year 2, calculate the change in net working capital as a
percentage of year 1 sales.
Question 3 options:
1.97%
2.02%
2.07%
2.12%
2.18%

Sales for year 2 of a new project are expected to increase by
13.50%. For every dollar increase in sales, current assets are
expected to increase by 20.70% and current liabilities by 6.15%.
For year 2, calculate the change in net working capital as a
percentage of year 1 sales.
a) 1.77%
b) 1.82%
c) 1.87%
d) 1.92%
e) 1.96%

Sales for year 2 of a new project are expected to increase by
14.50%. For every dollar increase in sales, current assets are
expected to increase by 22.70% and current liabilities by 7.15%.
For year 2, what is the absolute value of the change in cash as a
result of the changes in current assets and current liabilities if
the sales in year 1 are $1,000?

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