Question

Simpson Corporation expects to sell the following number of units of their newest product: YearUnit Sales 18,000 29,000 312,000 415,000 The revenue per unit is $180. NWC starts out at $50,000, then rises to 15% of sales. What is the change in cash flow for the NWC balance at the end of year 2

Answer 1

Change in cash flow (year 2) is $27,000

Step-by-step explanation:

Given:

Year Unit Sales

1 8,000

2 9,000

3 12,000

4 15,000

Growth per year sales = 15%

revenue per unit = $180

Computation:

Year1 Year2 Year3 Year4

Sales 8,000 9,000 12,000 15,000

Sales revenue 1,440,000 1,620,000 2,160,000 2,700,000

NWC requirement 216,000 243,000 324,000 405,000

Cashflows for NWC 166000 27000 81000 81000

Change in cash flow (year 2) is $27,000