How should their npv evaluation of today

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Question - Thompson Company is calculating the NPV of a five year investment in machinery. The required rate of return for their investment is 11% and the tax rate rate is 40%. How should their NPV evaluation of today through year 5 treat the $50,000 of working capital necessary for the investment?

a. Show a cash outflow of $50,000 today and a cash inflow of $50,000 in year 5

b. Show a cash inflow of $50,000 today and cash outflow of $50,000 in years 1 - 5

c. Multiply $50,000 by the income tax rate of 40% and show that amount as tax savings today

d. Multiply $50,000 by the present value factor associated with a five year investment at 11% and show that amount as a cash outflow today

Reference no: EM133171693

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