A new project is expected to generate an operating cash flow of $38,728 and will initially free up $11,610 in net working apital.Purchases of fixed assets costing $52,800 will be required to start up the project.What is the total cash flow for this project at Time zero?

Question

Quizplus · Accepted Answer

To calculate the total cash flow for this project at Time zero, we need to subtract the initial cash outflows (i.e. purchases of fixed assets) from the initial cash inflows (i.e. operating cash flow and change in net working capital).

Total cash flow = Operating cash flow + Change in net working capital - Purchases of fixed assets
Total cash flow = $38,728 + $11,610 - $52,800
Total cash flow = -$2,462

Therefore, the total cash flow for this project at Time zero is -$2,462 which is option B.

A New Project Is Expected to Generate an Operating Cash