Final answer:
The statement is false; temporary changes to working capital must be considered in capital budgeting as they impact the firm's financial health and its ability to sustain operations and grow.
Step-by-step explanation:
The statement that an addition to working capital that is not permanent should not be considered among the cash flows of a capital budget is false. Working capital is crucial for maintaining the daily operations of a business, and any changes to it, whether temporary or permanent, can affect a firm's liquidity and must be accounted for in capital budgeting.
When a firm invests in a capital project, such as purchasing equipment or starting a research and development project, the impact on working capital needs to be considered even if the change is not permanent. This is because financial capital, though not directly used to produce goods or services, is essential for acquiring the factors of production or goods and services necessary for a firm's operation and growth. Moreover, firms must carefully select their sources of financial capital, whether it's through early-stage investors, reinvesting profits, bank loans or bonds, or selling stock, as each source comes with different implications for cash flow and needs to be planned for in the firm's capital budget.