If a Project Is Expected to Increase Inventory by $15,000

question 5

Multiple Choice

If a project is expected to increase inventory by $15,000, increase accounts payable by $10,000, and decrease accounts receivable by $1,000, what effect does working capital have during the life of the project?

• A)increases investment by $4,000
• B)increases investment by $5,000
• C)increases investment by $6,000
• D)working capital has no effect during the life of the project

---

Definitions:

Normal Good

A type of good for which demand increases as the income of the consumer increases, showing a direct relationship between income and demand.

Income Elasticity

A measure of how much the demand for a good responds to a change in consumers' income.

Total Revenue

The total income generated by a firm from the sale of goods or services before any costs or expenses are subtracted.

Income Elasticity

A measure of how much the demand for a good or service changes in response to changes in consumer income.