Question

7. Which of the following is correct with respect to working capital and capital budgeting? a....

7. Which of the following is correct with respect to working capital and capital budgeting?

a. Investment in working capital is ignored in the capital budgeting process

b. Working capital usually has a different discount rate

c. Investment in working capital is assumed to be recovered at the end of the life of the project

d. All of the above are correct

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Answer #1

c. Investment in working capital is assumed to be recovered at the end of the life of the project

In capital budgeting methods, the Investment in Working capital is also considered while evaluating the projects. it is an important part of capital budgeting

The working capital investment is measured at the same discount rate which is used to evaluate the project. there is no separate discount for the Working capital

The investment in Working capital is assumed to be recovered at the end of the project as the investment in working capital mostly will be in Stock or debtors which will definitely be realized after concluding the project in full or partially in some situations.

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