One Should Consider Net Working Capital (NWC)in Project Cash Flows

question 17

Multiple Choice

One should consider net working capital (NWC) in project cash flows because

• A)typically firms must invest cash in short-term assets to produce finished goods.
• B)NWC represents sunk costs.
• C)firms need positive NPV projects for investment.
• D)inclusion of NWC typically increases calculated NPV.

---

Definitions:

Purchase-Money Security Interest

An interest in the property that secures payment or performance of an obligation where the property is purchased, giving the creditor rights in the purchased property.

Collateral

Assets or properties pledged by a borrower to secure a loan or obligation, ensuring the lender can recover the loaned funds in case of default by selling the collateral.

Debtor

is an individual or entity that owes money or an obligation to another party, known as the creditor.

Security Agreement

A legal contract that grants a lender a security interest in an asset, serving as collateral for a loan.