Question

For project A, the cash flow effect from the change in net working capital is expected to be -500 dollars at time 2 and the level of net working capital is expected to be 2,100 dollars at time 1. What is the level of current liabilities for project A expected to be at time 2 if the level of current assets for project A is expected to be 4,800 dollars at time 2?

Answer 1

Project A	Change in NWC	NWC	CA	CL
Time 1		$ 2,100
Time 2	$                  (500)	$ 2,600	$ 4,800	$ 2,200

Working capital is Current assets minus current liabilities.

Negative change in WC means change in current assets has increased more than change in current liiabilities.

Hence, with the help of change in NMC at time 2 and NMC at time 1, we can arrive at NMC at time 2 which is $ 2,600.

So, as per given amount of current assets at time 2, we can arrive at current liabilities at time 2 which are $2,200.