In calculating the net initial investment cash flows for capital budgeting analysis any increase in working capital required for the project should be included.

Question

Quizplus · Accepted Answer

Working capital is the amount of cash needed to fund the day-to-day operations of a business. When a new project is undertaken, it may require additional working capital to support the project's operations. Therefore, any increase in working capital required for the project should be included in the net initial investment cash flows calculation to accurately assess the project's profitability.

In Calculating the Net Initial Investment Cash Flows for Capital