Net Working Capital Is Expected to Increase by $25,000 in Year

question 54

Multiple Choice

Net working capital is expected to increase by $25,000 in year 5 of a project.If this extra working capital is recovered when the project ends in year 6,what is the effect on the project's net present value,if the cost of capital is 15%?

• A) NPV will not be affected because the $25,000 will all be recouped.
• B) NPV will increase by $12,429.42.
• C) NPV will decrease by $25,000.
• D) NPV will decrease by $1,621.23.

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