A proposed project requires an initial investment of $8,500 in current assets, 7

Question

A proposed project requires an initial investment of $8,500 in current assets, 75% of which will be financed with accounts payable. The project will have:

a)an initial cash outflow of $8,500 at time zero for net working capital.

b)a cash outflow for net working capital at the end of the project.

c)a cash outflow from net working capital at the end of the project.

d)a cash outflow for net working capital every year of the project's life.

a)an initial cash outflow of $8,500 at time zero for net working capital.

b)a cash outflow for net working capital at the end of the project.

c)a cash outflow from net working capital at the end of the project.

d)a cash outflow for net working capital every year of the project's life.

Explanation / Answer

Correct option is (B)

Every project evaluation will only consider the net working capital required at the beginning of the project and recovery of net working capital at the end of the project.

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