Question

# For project A, the cash flow effect from the change in net working capital is expected...

For project A, the cash flow effect from the change in net working capital is expected to be 100 dollars at time 2 and the level of net working capital is expected to be 2,100 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 5,900 dollars at time 1?

Net Working Capital in time 2 = \$2,100

Cash Flow Effect from the change in Net working capital = \$100

Net Working Capital in Time 2 = Net Working Capital in Time 1 + Cash Flow Effect from the change in Net working capital

or,  Net Working Capital in Time 1 = Net Working Capital in Time 2 - Cash Flow Effect from the change in Net working capital = \$2100 - \$100 = \$2000

Net Working Capital = Current Assets - Current Liabilities

or,Current Assets in Time 1 = Net Working Capital in time 1 + Current Liabilities in time 1 = \$ 2000+ \$5900 = \$7,900