Question

0 The Sisyphoan Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years. The cost of the machine is $30,000 and the machine will be depreciated straight line over its three-year life to a residual value of $0. The cane manufacturing machine will result in sales of 2000 canes in year 1. Sales are estimated to grow by 9% per year each year through year 3. The price per cane that Sisyphean will charge its customers is $15 each and is to remain constant. The canes have a cost per unit to manufacture of 9 each. Installation of the machine and the resulting increase in manufacturing capacity will require an increase in various net working capital accounts. It is estimated that the Sisyphean Corporation needs to hold 2% of its annual sales in cash, 5% of its annual sales in accounts receivable, 9% of its annual sales in inventory, and 7% of its annual sales in accounts payable. The firm is in the 35% tax bracket and has a cost of capital of 8% The required net working capital in the second year for the Sisyphean Corporation's project is closest to: he OA. $2.700 OB. $7,521 O C. $2.943 OD. - $2.943

Answer 1

Pariculars	Amount
Units in Year 1	2000
% increase from 1st Year @9%	180
Units in Year 2	2180
Unit price	15
Sales	32700
Cash @2% of sales	654
Accounts receivable @ 5% of sales	1635
Inventory @ 9% of sales	2943
Current assets	5232
Accounts payable @ 7 of sales	2289
Current Liabilities	2289
Net working capital (Currenet Assets - Current Liablities)	2943

Option C has to be selected

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