Working capital is one of the most common causes of misunderstanding in estimating project cash flows. The following are the most common errors:
I. forgetting about working capital entirely
II. forgetting that working capital may change during the life of the project
III. forgetting that working capital is recovered at the end of the project
IV. forgetting to depreciate the working capital
A) I and II only
B) I, II, and III only
C) II,III and IV only
D) I,II and IV only

Question

Quizplus · Accepted Answer

Forgetting about working capital entirely (I), forgetting that working capital may change during the life of the project (II), and forgetting that working capital is recovered at the end of the project (III) are all common errors in estimating project cash flows. Depreciating working capital (IV) is not a common error, as working capital is not depreciated. Therefore, the correct choice is B, which includes I, II, and III.

Working Capital Is One of the Most Common Causes of Misunderstanding