Friday, November 19, 2010

How does Net Working Capital change the affect of NPV?

A new, more efficient machine will last four years and allow inventory levels to decrease by $100,000 during its life. At a cost of capital of 13%, how does the net working capital change affect the project's NPV?How does Net Working Capital change the affect of NPV?
Let's assume it reduces inventory levels by 25 000 each year. Changes in net working capital should be included in cash flow projections so if this is plugged into ur calc, then ur npv should decrease by 74,361.78
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