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Problem:

A pharmaceutical company is considering investing in a new production line of eye drops. Other than investing in the equipment, the company needs to increase its cash and cash equivalents by $10,000, increase the level of inventory by $30,000, increase accounts receivable by $25,000, and increase accounts payable by $5,000 at the beginning of the investment; the company will recover back these changes in working capital at the end of the project ten years later. Assume the appropriate discount rate to be 12 percent.

Required:

Question: What are the relevant cash flows given the above information?.

Note: Explain all steps comprehensively.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M91148270

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