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Question content area top (Calculating changes in net operating working capital)Duncan Motors is introducing a...

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Finance

Question content area top

(Calculating changes in net operating working capital)Duncan Motors is introducing a new product and has an expected change in net operating income of $315,000.

Duncan Motors has a

30 percent marginal tax rate. This project will also produce $49,000

of depreciation per year. In addition, this project will cause the following changes in year 1:

Without the Project

With the Project

Accounts receivable

$36,000

$28,000

Inventory

28,000

39,000

Accounts payable

45,000

90,000

What is the project's free cash flow in year 1?

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