Consider the Following Statements About the Investment in Working Capital

question 15

Multiple Choice

Consider the following statements about the investment in working capital in a capital budgeting analysis:
I. Working capital often increases as the result of higher balances in accounts receivable or inventory necessary to support a project.
II. Working capital increases are sources of cash and should be included in a discounted-cash-flow analysis.
III. The time 0 cash investment in working capital is included in a discounted-cash-flow analysis as a cash outflow.
Which of the above statements is (are) correct?

• A) I only.
• B) II only.
• C) III only.
• D) I and II.
• E) I and III.

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