Working capital is a frequent source of errors in estimating project cash flows. These errors include
A)forgetting about working capital entirely and forgetting that working capital may change during the life of the project.
B)forgetting about working capital entirely, forgetting that working capital may change during the life of the project, and forgetting that working capital is recovered at the end of the project.
C)forgetting that working capital may change during the life of the project, forgetting that working capital is recovered at the end of the project, and forgetting to depreciate working capital.
D)forgetting about working capital entirely, forgetting that working capital may change during the life of the project, and forgetting to depreciate working capital.

Question

Quizplus · Accepted Answer

Forgetting about working capital entirely and forgetting that working capital may change during the life of the project are common errors. Additionally, some analysts forget that working capital is recovered at the end of the project, leading them to overestimate the project's cash outflows. Therefore, option B covers all three common errors related to working capital. Forgetting to depreciate working capital is not a common error as working capital is not depreciated, but rather it is recovered at the end of the project.

Working Capital Is a Frequent Source of Errors in Estimating