A company expects to need to increase their net working capital by $200,000 at the beginning of a potential project's life. By how much would this event affect the project's terminal cash flow at the end of its expected life if the company's tax rate is 40%?

Question

Leah Villanueva

Business

22 March, 17:40

A company expects to need to increase their net working capital by $200,000 at the beginning of a potential project's life. By how much would this event affect the project's terminal cash flow at the end of its expected life if the company's tax rate is 40%?

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Neil · Answer 1

+$200,000

Explanation:

The networking capital increase would be backed at the end of the project.

so, increase in net working capital result in positive cash flow at end of the project.

Working capital invested at beginning would recoup at the end of the project.