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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 19,000.Theprojectwillfreeup19,000. 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

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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: 19,000NetWorkingCapital:19,000 Net Working Capital: 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 = 19,000+19,000 + 3,500 - 4,500=4,500 = 18,000

So, the total cash flow for this project at time zero is $18,000.

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