A project under consideration by Bizet Co.will require the purchase of machinery for $50,000 and additional inventory for $15,000.Accounts receivable will increase by $12,000 and accounts payable by $14,000.Liability insurance will increase by $2,500 per year and utilities expense by $1,500 per year.What is the investment in working capital required by this project?
A)$77,000
B)$41,000
C)$13,000
D)$4,000

Question

Quizplus · Accepted Answer

The investment in working capital is calculated as the increase in current assets minus the increase in current liabilities. Here, the increase in inventory ($15,000) and accounts receivable ($12,000) totals $27,000, while the increase in accounts payable is $14,000. Thus, the net investment in working capital is $27,000 - $14,000 = $13,000.

A Project Under Consideration by Bizet Co