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You are considering adding a micro brewery on to one of your firm's existing restaurants
You are considering adding a micro brewery on to one of your firm's existing restaurants. This will entail an increase in inventory of $8,000, an increase in accounts payables of $2,500, and an increase in property, plant, and equipment of $40,000. All other accounts will remain unchanged. The change in net working capital resulting from the addition of the micro brewery is:
Expert Solution
Computation of Change in Net Working Capital resulting from the addition of the Micro Brewery:
Change in Net working Capital = Change in Current Assets - Change in Current Liabilities
Here,
Change in Current Assets = Change in Inventory = $8,000
Change in Current Liabilities = Change in Accounts Payable = $2,500
Change in Net working Capital = $8,000-$2,500=$5,500
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