48
1 point
A company is adding an additional machine to increase its operating capacity. As utilization of the new machine ramps up, the company will see changes in revenues,
operating costs, taxes, accounts receivable, inventories, accounts payable and other elements of net working capital. For a particular year, changes are detailed below:
Revenue will be $100,000
Variable costs will be 60% of revenue
Fixed costs (including depreciation expense) will be $30,000
Depreciation expense caused by the new machine will be $5,000
Accounts receivable will increase by $8,000
Inventory will increase $9,000
Accounts payable will increase $6,000
Accrued expenses will increase $2,000
The effective tax rate is 30%
What will be the effect on free cash flow for the year in question? Assume the only investment in fixed assets will be the initial investment, so this will not affect
annual free cash flows. No other factors change.
Enter your answer as a monetary amount rounded to four decimal places, but without the currency symbol. For example, if your answer is $90.1234, enter 90.1234 If your
result is less than zero, enter a negative number, like this-90.1234
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