Working capital is calculated as the current assets (cash, receivables, inventory and marketable securities in this question) minus the current liabilities (accounts payable in this question). Currently, the working capital is $810,000 ($100,000 + $560,000 + $350,000 + $200,000 ? $400,000). Under the new proposal it will be $910,000 (110,000 + $690,000 + $380,000 + $200,000 ? 470,000). This is an increase of $100,000 in the working capital of the company.
This is the amount of the change in working capital, but the level of working capital will increase if the proposal is implemented.
This answer results from including in working capital the increase in fixed assets and deducting the increase in net income that will result from the plant expansion. Neither of those items are components of working capital.
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The impact of the plant expansion on Finan's working capital would be