A company needs an increase in working capital of $20,000 in a project that will last four years.The company's tax rate is 30%,and its discount rate is 10%.What is the approximate present value of the working capital to be released at the end of the project? (Do not round your intermediate calculations and round the final answer to the nearest whole dollar.)
A) $6,000.
B) $9,562.
C) $13,660.
D) $14,000.

Question

Quizplus · Accepted Answer

The present value of the working capital released at the end of the project is calculated by discounting the $20,000 back to the present value using the formula: PV = FV / (1 + r)^n, where FV is the future value ($20,000), r is the discount rate (10% or 0.10), and n is the number of years (4). PV = $20,000 / (1 + 0.10)^4 = $13,660.

A Company Needs an Increase in Working Capital of $20,000