Question

In the previous problem, suppose the project requires an initial investment in net working capital of $150,000, and the fixed asset will have a market value of $185,000 at the end of the project. What is the project’s Year 0 net cash flow?

Answer 1

Answer: See explanation

Explanation:

You didn't tell us the previous problem you are talking about but let me help out.

The project’s Year 0 net cash flow will be calculated as:

= - Initial cost in fixed assets - Net working capital

Since we already know that our net working capital is $150,000, let's assume that the initial cost in fixed assets given in your previous problem is $2,000,000.

Therefore, the project’s Year 0 net cash flow will be:

= -2,000,000 - 150,000

= -2,150,000