Wislon and Taylor are implementing a project which will increase accounts payable by $5000,increase inventory by $3000,and decrease accounts receivable by $2000.All net working capital will be recouped when the project terminates.What is the cash flow related to the net working capital for the last year of the project?

Question

Quizplus · Accepted Answer

The change in net working capital can be calculated as follows: 
Change in NWC = Increase in Accounts Payable + Increase in Inventory - Decrease in Accounts Receivable 
Change in NWC = $5000 + $3000 - (-$2000) 
Change in NWC = $10000

However, the question asks for the cash flow related to net working capital for the last year of the project, which means we only need to consider the change in NWC when the project terminates. Since all net working capital is recouped when the project ends, the cash flow related to NWC in the last year of the project is the opposite of the change in NWC: 
Cash flow related to NWC = -$10 000 
Therefore, the correct answer is B.

Wislon and Taylor Are Implementing a Project Which Will Increase