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1) During the last year of operations, Theta's accounts receivable increased by $10,000, accounts payable increased by $5,000 and inventories increased by $2,000
1) During the last year of operations, Theta's accounts receivable increased by $10,000, accounts payable increased by $5,000 and inventories increased by $2,000. What is the total impact of these changes in cash flow?
2) Suzanne's Cleaners is considering a project that has the following cash flow data. Assume the cost of capital is 8.2%. What is the project's payback?
-$662 (Year 0) ; $238 (Year 1) ; $462 (Year 2) ; $701 (Year 3)
Expert Solution
1) Computation of the total impact these of changes in cash flow:-
Total impact = -Increase in accounts receivable + Increase in accounts payable - Increase in inventories
= -$10,000 + $5,000 - $2,000
= -$7,000
2) Project's payback period = 1.92 years
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