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12 May, 08:26

Scrapping Products is implementing a project that will initially increase accounts payable by $3,000, increase inventory by $1,800, and decrease accounts receivable by $1,200. All net working capital will be recouped when the project terminates. What is the cash flow related to the net working capital for the last year of the project?

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  1. 12 May, 10:00
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    Net working capital = - $2400

    Explanation:

    given data

    accounts payable = $3,000

    increase inventory = $1,800

    decrease accounts receivable = $1,200

    to find out

    cash flow related to the net working capital

    solution

    we get here first net working capital that is express as

    Net working capital = Total current assets - Total current liabilities ... 1

    here

    Total current assets = Increase in inventory - Decrease in accounts receivables ... 2

    Total current assets = $1800 - $1200

    Total current assets = $600

    and total current liabilities is = $3000 so from equation 1 we get here

    Net working capital = $600 - $3000

    so Net working capital = - $2400
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