Changes in Net Working Capital

question 37

Multiple Choice

Changes in net working capital

• A)are included in project analysis only if they represent cash outflows.
• B)only affect the initial cash flows of a project.
• C)can affect the cash flows of a project every year of the project's life.
• D)are generally excluded from project analysis due to their irrelevance to the total project.
• E)affect the initial and the final cash flows of a project but not the cash flows of the middle years.

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Definitions:

Opportunity Cost

The value of the best alternative that is foregone by choosing a particular action or decision, important in evaluating the cost of choices.

Alternative

An option among a set of choices in decision-making scenarios.

Total Costs

The sum of all expenses incurred by a business in producing goods or services, including fixed and variable costs.

Prime Cost

Direct materials cost plus direct labor cost.