ITT is building a new plant to make telephones in South Carolina. The initial working capital needs of the plant to finance inventory, payroll, and so forth are $5 million. Each year these needs are expected to increase by 5 percent. After five years the plant will be closed and the working capital recovered. In undertaking a capital budgeting exercise to see whether or not to build the plant, what are the cash flows that should be included to take account of the working capital?

Answer rating: 100% (QA)

To account for the working capital in the capital budgeting exercise for building the plant we need ... View the full answer