Tootco, Inc. is evaluating a new project using the net present value approach and a 12% hurdle rate. It has determined that, in addition to an investment in plant and equipment, the project will require a $12,000 investment in net working capital. The project is expected to have a 5-year life, at the end of which the investment in net working capital will be recovered. The present value of $1 and the future value of $1 factors for 5 years at 12% are 0.5674 and 1.7623, respectively. In carrying out its net present value analysis, how should Tootco treat the working capital requirement both when it is made at the beginning of the project and at the end of the project? Treatment of Working Capital Requirement Beginning of Project End of Project.

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To evaluate the net present value NPV of the project and determine how to treat the working capital ... View the full answer