A project will reduce the amount of inventory that a firm must carry. What effect will this have on the project's cash flows if all inventory is purchased for cash?
There will only be a cash outflow at time zero.
There will be no effect on the cash flows since the inventory has already been paid for.
There will be a cash outflow at time zero and an equal cash inflow when the project ends.
There is an assumed cash outflow equal to the inventory reduction at the end of the project.