In a Discounted Cash Flow (DCF) Analysis, a Required Incremental

question 106

Multiple Choice

In a discounted cash flow (DCF) analysis, a required incremental investment in net working capital:

• A) Should be amortized over the useful life of the equipment, to yield an improved estimate of the return on the proposed project.
• B) Can be disregarded because the same amount of cash will be recovered at the end of the project's life.
• C) Should be treated as a recurring cash outflow over the life of the project.
• D) Should be treated as a reduction in the required cash outflow in period 0.
• E) Should be treated as an immediate cash outflow that is later recovered when this incremental investment is no longer needed.