Some Investment Projects Require That a Company Expand Its Working

question 180

Multiple Choice

Some investment projects require that a company expand its working capital to service the greater volume of business that will be generated.Under the net present value method,how should the investment of working capital be treated?

• 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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Definitions:

Raw Materials

Basic materials and substances used in the initial stages of the production process, destined to be transformed into finished goods.

Direct Labour

The cost of workers who are directly involved in the production of goods or services.

Manufacturing Overhead

The indirect costs associated with the production process, including utilities, rent, and maintenance expenses of manufacturing facilities.

Cost of Goods Manufactured

The total cost incurred by a company to produce goods in a specific period, including materials, labor, and overhead costs.