Newcastle Coal Company is considering a project that requires an investment in n
ID: 2645652 • Letter: N
Question
Newcastle Coal Company is considering a project that requires an investment in new equipment of $3,800,000, with an additional $190,000 in shipping and installation costs. Newcastle estimates that its accounts receivable and inventories need to increase by $760,000 to support the new project, some of which is financed by a $304,000increase in spontaneous liabilities (accounts payable and accruals).
The total cost of New castle's new equpment is _________ and consists of the price of the new equipment plus the _____________.
In contrast, Newcastle's initial investment outlay is _______.
Explanation / Answer
Answer:
Investment in new equipment =$3,800,000
Shipping and installation costs = $190000
Total Cost of the New castle's new equipment = $3800000+$190000 = $3990000
Investment in net working capital = Increase in current assets