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28 June, 05:54

A new project is expected to generate an operating cash flow of $38,728 and will initially free up $11,610 in net working capital. Purchases of fixed assets costing $52,800 will be required to start up the project. What is the total cash flow for this project at Time zero?

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  1. 28 June, 06:28
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    The aggregate cash flow for the project at time zero is $41,190

    Explanation:

    The net cash outflow at time zero is computed as:

    Net cash outflow at time zero = Cash outflow for purchase fixed assets at time zero - Cash inflow for the net working capital at time zero

    where

    Cash outflow for purchase fixed assets at time zero is $52,800

    Cash inflow for the net working capital at time zero is $11,610

    Putting in the above formula:

    = $52,800 - $11,610

    = $41,190
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