A company needs an increase in working capital of $10,000 in a project that will last 3 years. The company's tax rate is 30% and its after-tax discount rate is 14%.Click here to view Exhibit 14B-1 to determine the appropriate discount factor(s) using table.The present value of the release of the working capital at the end of the project is closest to: (Round your final answer to the nearest whole number.)
A) $6,750
B) $3,000
C) $6,900
D) $3,250

Question

Quizplus · Accepted Answer

The present value of the release of the working capital at the end of the project is $6,750. This is calculated by multiplying the working capital by the discount factor for 3 years at 14%, which is 0.675.

A Company Needs an Increase in Working Capital of $10,000