13. The working capital requirements for a new project are due to the required i
ID: 2716111 • Letter: 1
Question
13. The working capital requirements for a new project are due to the required inventory levels. The firm requires an inventory valued at $20,000 in time period 0, $30,000 in time 1 and 40,000 in time 2. If these are the only working capital requirements, which of the following is true? (a) there are no cash flows in time period 2 arising from working capital requirements (b) the cash flow arising from working capital requirements in time period 2 is $30,000 (c) the cash flow arising from working capital requirements in time period 2 is $-30,000 (d) the cash flow arising from working capital requirements in time period 2 is $-10,000
why choose D?
Explanation / Answer
Inventory required in year 2 was $40,000 and year 1 was $30,000. The net increase required during year was $10,000. i.e. cash outflows regarding to inventory was $10,000.
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