Six Twelve, Inc. , Is considering opening up a new convenience store in downtown
ID: 2695838 • Letter: S
Question
Six Twelve, Inc. , Is considering opening up a new convenience store in downtown New York City. The expected annual revenue at the new store is $800,000. To estimate the increase in working capital, analysts estimate the ratio of cash and cash equivalents to revenue to be 0.03 and the ratios of receivables, inventories, and payables to revenue to be 0.05, 0.10, and 0.04, respectively, in the same industry. What is the increnental cash flow related to working capital when the store is opened? (Enter negative using a negative sign).Explanation / Answer
800000*0.19=152000 800000*0.03=24000 increnental cash flow related to working capital when the store is opened=$648000