15. Which of the following items is considered when computing the terminal cash

Question

15. Which of the following items is considered when computing the terminal cash flow for an expansion project? a. Change in net working capital b. Inflation during the project's life c. Initial cash outlay of the project. d. Opportunity cost of the project. e. Sunk cost of the project. 16. The following information relates to Lobo Corporation. Cash Accounts receivable Marketable securities Notes payable Accrued rent Based on this information, the net working capital of the company is: $20,000 $50,000 $65,000 $10,000 $5,000 a. $130,000 b. $105,000 c. $115,000 d. $120,000 e. $100,000

Explanation / Answer

15.

The correct answer is a. Change in net working capital.

This is considered in the terminal cash flow if there is a recovery of the same.

16. The correct answer is d. $ 120,000

Net Working Capital = Current Assets - Current Liabilities

= ( Cash+ Accounts Receivable + Marketable Securities )- ( Notes Payable + Accrued Rent)

= ( $ 20,000 + $ 50,000 + $ 65,000) - ( $ 10,000 +$ 5,000)

= $ 120,000

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