Net Working Capital

question 34

Multiple Choice

Net working capital:

• A)can be ignored in project analysis because any expenditure is normally recouped by the end of the project.
• B)requirements generally,but not always,create a cash inflow at the beginning of a project.
• C)expenditures commonly occur at the end of a project.
• D)is frequently affected by the additional sales generated by a new project.
• E)is the only expenditure where at least a partial recovery can be made at the end of a project.

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Definitions:

After-tax Salvage Value

The estimated value of an asset at the end of its useful life, after deducting any taxes owed from its disposal.

Required Rate of Return

The minimum expected return an investor demands for the risk associated with holding an investment.

Operating Cash Flow

The cash generated from the normal operating activities of a business over a specific period.

CCA Class

A category within the Capital Cost Allowance system in Canada that groups depreciable assets based on their type and the rate at which they can be depreciated for tax purposes.