Question

sourdough corporation needs to maintain 8 percent of its sales in net working capital. the firm is considering a 5-year project which will increase sales from their current level of $110,000 to $146,000, $152,000, $158,000, $164,000, and $155,000 for years 1 to 5 of the project, respectively. what amount should be included in the project analysis cash flows for net working capital for year 3 of the project?

Answer 1

The amount to be included in the project analysis cash flows for net working capital for year 3 of the Sourdough Corporation project is $12,640, which is 8 percent of the year 3 sales of $158,000.

Step-by-step explanation:

The question asks for the amount to be included for net working capital in the project analysis cash flows for year 3 of the Sourdough Corporation project. The corporation maintains 8 percent of its sales in net working capital. In year 3, the sales are projected to be $158,000. To calculate the net working capital for year 3, we take 8 percent of $158,000.

Calculation:
Net Working Capital for Year 3 = 0.08 × $158,000 = $12,640.

Therefore, $12,640 should be included in the cash flow projection for net working capital for year 3 of the project.