A new project requires an increase in both current assets and current liabilities of $125,000 each.What is the overall impact on net working capital investment?
A)an increase of zero.
B)an increase of $125,000.
C)an increase of $250,000.
D)an increase of $62,500, when averaged over the life of the project.

Question

Quizplus · Accepted Answer

Increasing both current assets and current liabilities by the same amount does not change the amount of net working capital invested. Therefore, the overall impact on net working capital investment is an increase of zero.

A New Project Requires an Increase in Both Current Assets