Question

project requires $15,000 of net working capital throughout its 5-year life. how is this requirement handled in project analysis? select all that apply.multiple select question.$15,000 is a cash inflow in year 5.$15,000 is a cash outflow at time zero.$15,000 is a cash outflow in year 5.$15,000 is a cash inflow at time zero.

Answer 1

The $15,000 of net working capital required for a project is accounted for as a cash outflow at time zero and as a cash inflow at the end of the project in year 5.

Step-by-step explanation:

When analyzing a project that requires $15,000 of net working capital throughout its 5-year life, two accounting transactions are commonly considered. At the start of the project (time zero), the initial outlay of $15,000 is recorded as a cash outflow, as the funds are invested into net working capital.

It is not considered a cash inflow at time zero because the company is spending this money upfront. Conversely, at the end of the project (year 5), when the net working capital is no longer needed and is recovered, the $15,000 is considered a cash inflow. The recovery of net working capital is never treated as an outflow at the end of the project, hence there is no outflow of cash in year 5.