Following question #14, suppose the project requires an initial investment in net working capital of $300,000, and maintains at this level until the end of year 2. And, this net working capital will be recovered at the end of the project. What are the project's incremental free cash flows?

Question

Loki

Business

25 September, 02:55

Following question #14, suppose the project requires an initial investment in net working capital of $300,000, and maintains at this level until the end of year 2. And, this net working capital will be recovered at the end of the project. What are the project's incremental free cash flows?

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Answers (1)

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Cali Pittman · Answer 1

-3,000,000 1,375,000 1,375,000 1,675,000

Explanation:

Working capital is the amount of money that is invested in a business to run its day to day operations. In the given question, working capital is injected in year 1 to run operations of the project over 3 years and this working capital is recovered when the project ends. The initial investment of working capital reflects a cashflow outflow in the 1st year of the project.