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