Question

A firm is considering investing in a new machine that will last for 6 years. They expect the new machine to initially reduce the inventory that they need by $105,000. After the initial inventory reduction, the firm will be able to decrease their parts inventory by $10,000 each year. At the end of the machine's life the inventory reductions will be reversed. What is the initial net working capital needed for this project

Answer 1

Answer:

-$155,000

Step-by-step explanation:

The quantity of inventory that would be reduced= -105000

The decrease in parts inventory = 10000

Decrease from year 1 to 6 = -10000*6

= -60000

Then the net working capital

= 105000 + 10000 - 60000

= $155000

Therefore the net working capital for this project in the sixth year is = -$155000

Step-by-step explanation:

Answer 2

-$155,000

Step-by-step explanation:

The quantity of inventory that would be reduced= -105000

The decrease in parts inventory = 10000

Decrease from year 1 to 6 = -10000*6

= -60000

Then the net working capital

= 105000 + 10000 - 60000

= $155000

Therefore the net working capital for this project in the sixth year is = -$155000