Healthy Potions, Inc., is considering investing in a new production line for eye

Question

Healthy Potions, Inc., is considering investing in a new production line for 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 $43,726, increase accounts receivable by $25,000, and increase accounts payable by $5,000 at the beginning of the project. Healthy Potions will recover these changes in working capital at the end of the project 7 years later. Assume the appropriate discount rate is 8.9 percent. What are the present values of the relevant investment cash flows?

Explanation / Answer

Healthy Potions, Inc., is considering investing in a new production line for eye

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