Suppose an investment requires the purchase of equipment for $10,000 and decreases working capital by $500. The company must spend $1,000 to install the equipment. The investment cash flow is closest to:

Question

Quizplus · Accepted Answer

The investment cash flow is calculated by adding the cost of purchasing the equipment ($10,000), the cost to install the equipment ($1,000), and the decrease in working capital (-$500, which is actually an inflow because it's a decrease in working capital). Therefore, the total investment cash flow is $10,000 + $1,000 - $500 = $10,500.

Suppose an Investment Requires the Purchase of Equipment for $10,000