Kay's Nautique is considering a project which will require additional inventory of €128,000 and will also increase trade payables by €45,000 as suppliers are willing to ﬁnance part of these purchases.
Trade receivables are currently €80,000 and are expected to increase by 10% if this project is
Accepted.What is the initial project cash ﬂow needed for net working capital?

Question

Quizplus · Accepted Answer

To calculate the initial project cash flow needed for net working capital, we need to find the change in net working capital.

Change in Net Working Capital = Increase in Inventory + Increase in Trade Receivables - Increase in Trade Payables

Increase in Inventory = €128,000 
Increase in Trade Payables = €45,000 
Increase in Trade Receivables = 10% x €80,000 = €8,000

Therefore, Change in Net Working Capital = €128,000 + €8,000 - €45,000 = €91,000

Since we need the initial project cash flow, we do not consider any cash flows related to the project itself.

Thus, the correct choice is B.

Kay's Nautique Is Considering a Project Which Will Require Additional