11) Working capital refers to the difference between current assets and current liabilities.
12) What is working capital?
13) Cutting Edge Concrete (CEC) set the industry standard for high-performance concrete from the company's conception in 2008 until 2012. New environmentally beneficial innovations opened a new marketing arena for concrete manufacturers in 2008, with concrete mixes that reduced pollution caused by traffic.
In Stage I, the project-identification stage, CEC determined that green construction ensured the company remained competitive in industry.
In Stage II, the information-gathering stage, CEC contracted a cost-benefit analysis and cost-effectiveness analysis to measure the effect that adoption of new technology would have on revenue. CEC finds that the after-tax initial investment for the machine is $410,000 and the machines have a useful life of 8 years. Cash inflows are estimated to cost $11,000 and $21,000 from the disposal of old machine is $21,000.
Cost of new machine$410,000
Investment in working capital11,000
Cash flow from disposal of existing machine(21,000)
Required
Compute the net initial investment for the machine.
A) $300,000
B) $400,000
C) $500,000
D) $600,000
E) $700,000