19. A company needs an increase in working capital of $20,000 in a project that

Question

19. A company needs an increase in working capital of $20,000 in a project that will last 4 years. The company's tax rate is 30% and its after-tax discount rate is 10%. How much is the present value of the release of the working capital at the end of the project closest to?

19. A company needs an increase in working capital of $20,000 in a project that will last 4 years. The company's tax rate is 30% and its after-tax discount rate is 10%. How much is the present value of the release of the working capital at the end of the project closest to?

     A. $13,660 B. $14,000 C. $6,000 D. $9,562

Explanation / Answer

Option. A is correct:

Present value of money: = FV/ (1+r) ^N Future value FV= 20000 Rate of interest r= 10% Number of periods N= 4 Present value = 20000/ (1+0.1)^4 =              13,660.27

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