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

question 127

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 t_o-$25,000 outflow
• T₅-inflow, which has a present value of $12,429.42 (25,000/1.15⁵)

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Definitions:

Fermentation

Anaerobic glucose-breakdown pathway that produces ATP without the use of electron transfer chains.

Pyruvate

A critical molecule in cellular metabolism that marks the end of glycolysis and the starting point for the Krebs cycle in aerobic respiration or fermentation in anaerobic conditions.

NAD+

Nicotinamide adenine dinucleotide, a coenzyme found in all living cells that is critical in metabolic processes, particularly in redox reactions.

NADH

Nicotinamide adenine dinucleotide (NADH) serves as an electron carrier, playing a crucial role in cellular energy production during the process of oxidative phosphorylation.