Some Investment Projects Require That a Company Expand Its Working

question 71

Multiple Choice

Some investment projects require that a company expand its working capital at the initiation of a project to service the greater volume of business that will be generated.Assuming a project in which the increased working capital will no longer be required after the end of the project,under the net present value method,these changes in working capital should be treated as:

• A) an initial cash outflow for which no discounting is necessary.
• B) a future cash inflow for which discounting is necessary.
• C) both an initial cash outflow for which no discounting is necessary and a future cash inflow for which discounting is necessary.
• D) irrelevant to the net present value analysis.

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