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Initial investment for proposed capital expenditure
Course:- Financial Management
Reference No.:- EM131352405




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Samuels Manufacturing is considering the purchase of a new machine to replace one it believes is obsolete. The firm has total current assets of $ 913 comma 000 and total current liabilities of $ 641 comma 000. As a result of the proposed? replacement, the following changes are anticipated in the levels of the current asset and current liability accounts noted. Account Change Accruals plus $ 36 comma 000 Marketable securities 0 Inventories negative 15 comma 000 Accounts payable plus 86 comma 000 Notes payable 0 Accounts receivable plus 148 comma 000 Cash plus 15 comma 000 a. Using the information? given, calculate any change in net working capital that is expected to result from the proposed replacement action. b. Explain why a change in these current accounts would be relevant in determining the initial investment for the proposed capital expenditure. c. Would the change in net working capital enter into any of the other cash flow components that make up the relevant cash? flows? Explain.




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