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

question 20

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

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Definitions:

Straight-Debt Value

This refers to the value of a company's bonds or debt if no conversion option exists, viewed as traditional fixed-income securities.

Convertible Bonds

Bonds that can be converted into a predetermined amount of the issuing company's shares, usually at the discretion of the bondholder.

Par Value

The face value or nominal value of a stock or bond, set by the issuing company.

Credit Derivatives

Financial instruments used to manage exposure to credit risk by transferring it from one party to another without transferring the underlying assets.