A company needs an increase in working capital of $50,000 in a project that will last four years.The company's tax rate is 30%,and its discount rate is 8%.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) $15,000.
B) $25,726.
C) $35,000.
D) $36,751.

Question

Quizplus · Accepted Answer

The present value (PV) of the working capital to be released at the end of the project can be calculated using the formula for the present value of a single sum: PV = FV / (1 + r)^n, where FV is the future value ($50,000), r is the discount rate (0.08), and n is the number of periods (4 years). Plugging in the values: PV = $50,000 / (1 + 0.08)^4 = $50,000 / 1.36049 = $36,751 (rounded to the nearest whole dollar).

A Company Needs an Increase in Working Capital of $50,000