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the project will require an initial investment of $300,000 in net working capital. from year 1 onwards, the project requires net working capital level to equal to 10 percent of that year's projected sales. (note: since there is an initial investment in working capital, you only need to determine the net change from year to year. assume that you can recover your working capital investment at the end of the project.

Respuesta :

The net working capital required for the project will be $600,000.

What is a working capital?

Working capital (WC) is a financial metric that measures the operating liquidity that a company, organization, or other body, including a government institution, has available. Working capital is included in operational capital together with fixed assets like plant and equipment. Current liabilities less Current Assets equals Working Capital. Even if a business may be profitable and endowed with assets, it may lack liquidity if its assets cannot be quickly transformed into cash. To ensure that a company can continue operating and has enough money to pay both maturing short-term debt and impending operational expenses, it has to have positive working capital. Inventory, accounts receivable and payable, and the cash management are all a part of working capital management.

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