Question

For project A, the cash flow effect from the change in net working capital is expected to be -300 dollars at time 2 and the level of net working capital is expected to be 1,800 dollars at time 2. What is the level of current assets for project A expected to be at time 1 if the level of current liabilities for project A is expected to be 4,700 dollars at time 1?

Answer 1

Cash flow effect from the change in working capital = -300 [ t=2]

This implies that working capital has increased in year 2 by 300 compared to year 1

Level of working caital at t=2 = 1800

so level of working capital at t=1 = 1500 [1800-300]

Now current liabilities = 4700 at t= 1

so current assets :

working capital at t=1 = current assets - current liabilities

1500 = current assets - 4700

current assets = 6200

Answer : current assets = 6200 [Thumbs up please]