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Capital budgeting problem

(Guest)

Working capital is a cash outflow like purchase of fixed assets the beginning of the project and at the end of the project ,it's treated as cash inflow like sale of capital assets.The amount of working capital remaining may not be the same as working capital invested at the beginning of the project.Am I right?

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5 Replies

CA. Sandeep Kumawat (CA) (341 Points)
Replied 27 February 2016

It should not be same in practical world (mainly it will change because of accrual of margin/loss in business operations), but in study material you can see WC considered same at both point of time.

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(Guest)

Thanks Sandeep kumawat

(Guest)

In the form of contingency fund working capital should include unexpected occurrence ie.market downturn,underperformance facility.

CA ANAND V KAKU (CA ) (155 Points)
Replied 27 February 2016

to take a complete overview of the project we consider that fixed assets, working capital etc are realised at the end of the project life. The realised amount may be given in the question , if it is not given in numerical we consider the same amount which was invested.