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Assume that management of Trayco has generated the following data about an investment project that has a five-year life:
Assume that Trayco’s marginal tax rate is 30% and all cash flows come at the end of the year. In evaluating the decision how is the additional investment in working capital considered? A. As a deduction from the cost of the investment. B. As an adjustment to annual cash flows. C. Ignored because it will be recovered at the end of the investment. D. As an additional initial investment that will be recovered at the end of year 5. |