Question: A firm forecasts its net working capital needs for a 5 - year project as follows: t = 0 : $ 3 2 5 ,

A firm forecasts its net working capital needs for a 5-year project as follows:
t=0: $325,000
t=1 through t=4: NWC increases by $50,000 per year
t=5: NWC goes to $0
Assume the WACC for this project is 8% per year. If the firm could cut its NWC needs in half (i.e. the initial NWC would be cut in half, and the annual increases would be half as much), by using lean operation techniques, by how much would the NPV of the project be improved?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!