A new project you are reviewing will generate an operating cash flow of $19,000. The project will free up $3,500 in net working capital. Initially, $4,500 will be needed for fixed asset purchases. What is the total cash flow for this project at time zero? Group of answer choices $18,000 $20,000 -$1,000 $1,000 $8,000
Question
A new project you are reviewing will generate an operating cash flow of 3,500 in net working capital. Initially, $4,500 will be needed for fixed asset purchases. What is the total cash flow for this project at time zero?
Group of answer choices
$18,000
$20,000
-$1,000
$1,000
$8,000
Solution
The total cash flow for a project at time zero can be calculated by adding the operating cash flow, the net working capital, and the fixed asset purchases (which is usually considered as a cash outflow, hence it is subtracted).
Here's how you can calculate:
Operating Cash Flow: 3,500 Fixed Asset Purchases: $4,500
Total Cash Flow at Time Zero = Operating Cash Flow + Net Working Capital - Fixed Asset Purchases
Total Cash Flow at Time Zero = 3,500 - 18,000
So, the total cash flow for this project at time zero is $18,000.
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