Suppose you are a CFO of a company and evaluating an investment proposal submitted by your subordinate. You find that the analysis is correct except that it  has ignored net working capital. You expect that the project would require net working capital of $500,000 at time 0, $800,000 from year 1 to year 4, $700,000 from year 5 to year 9 and totally recovered at year 10.

If your subordinate had calculated an NPV of $680,000, what should be the project's NPV including the effects of changes in net working capital? Assume a cost of capital of 10% and a tax rate of 20%.

Answer rating: 100% (QA)

To calculate the projects NPV including the effects of changes in net working capital you should inc... View the full answer