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.

---

Definitions:

U.S. Antitrust Laws

Legislation aimed at preventing monopolies and promoting competition, ensuring a fair marketplace for consumers and businesses.

Formal Agreements

Legally binding contracts or arrangements between parties.

Oligopolistic Industry

A market structure characterized by a small number of firms controlling a large market share, leading to limited competition.

Dominant Firm

A company that has a large majority share of the market and can significantly influence the market price and competition.