Answer (B) is correct . The working capital investment is treated as a $50,000 outflow at the beginning of the project and a $50,000 inflow at the end of 4 years.50000/1.12^4-50000.
Answer (A) is incorrect because The firm will have its working capital tied up for 4 years, which results in a cost of $18,000 at 12% interest.
Answer (C) is incorrect because The working capital investment is recovered at the end of the fourth year. Hence, the working capital cost of the project is the difference between
Answer (D) is incorrect because The answer cannot exceed $50,000, which is the amount of the cash outflow.
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