How Does Net Working Capital Affect the NPV of a Five-Year

question 109

Multiple Choice

How does net working capital affect the NPV of a five-year project if working capital is expected to increase by $25,000 and the firm has a 15% cost of capital?

• A)NPV will increase by $9,322
• B)NPV will increase by $12,571
• C)NPV will decrease by $25,000
• D)NPV will decrease by $12,571

Comprehend the role and functionality of enterprise computing in organizational networks.

Recognize the significance and characteristics of executive and operational support systems.

Appreciate the importance of software in management information systems.

Differentiate between various computing models and their business applications.

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Definitions:

Subsidiary Ledger

A detailed ledger that contains all the transaction details of a specific account, which then summarizes into the general ledger.

Long-term Liability

Financial obligations that are due after a period of more than one year, such as bonds payable or long-term loans.

Cost Method

An accounting method used to value inventory or investments, where the cost of the goods or the investment purchase price is the basis for the value on the balance sheet.

Long-term Investments

Generally, (1) investments in stocks and bonds of other companies that companies normally hold for many years, and (2) long-term assets, such as land and buildings, not currently being used in operations.