A proposed project requires an initial investment of $8,500 in current assets,75% of which will be financed with accounts payable.The project will have:
A) an initial cash outflow of $8,500 at time zero for net working capital.
B) a cash outflow for net working capital at the end of the project.
C) a cash inflow at the end of the project from net working capital.
D) a cash outflow for net working capital every year of the project's life.

Question

Quizplus · Accepted Answer

The initial investment in current assets is $8,500, but 75% is financed with accounts payable, meaning only 25% ($2,125) is the actual cash outflow at time zero. At the end of the project, the net working capital is recovered, resulting in a cash inflow.

A Proposed Project Requires an Initial Investment of $8,500 in Current