What effect is expected at the end of the life of a project that initially required a $20,000 increase in net working capital?
A)the $20,000 must now be paid by the firm
B)the firm receives a $20,000 cash inflow
C)taxable income is reduced by $20,000
D)no effects are expected from sunk costs

Question

Quizplus · Accepted Answer

At the end of the life of a project that initially required a $20,000 increase in net working capital, the firm is expected to receive a $20,000 cash inflow. This is because the net working capital invested in the project is expected to be recouped at the end of the project, along with any additional profits. Therefore, the firm should see a return on its investment in the form of increased cash inflows.

What Effect Is Expected at the End of the Life