Question

A new project is expected to generate an operating cash flow of $38,728 and will initially free up $11,610 in net working capital. Purchases of fixed assets costing $52,800 will be required to start up the project. What is the total cash flow for this project at Time zero?

Answer 1

The aggregate cash flow for the project at time zero is $41,190

Step-by-step explanation:

The net cash outflow at time zero is computed as:

Net cash outflow at time zero = Cash outflow for purchase fixed assets at time zero - Cash inflow for the net working capital at time zero

where

Cash outflow for purchase fixed assets at time zero is $52,800

Cash inflow for the net working capital at time zero is $11,610

Putting in the above formula:

= $52,800 - $11,610

= $41,190