1. Recalling from our second class session and the first project component how to calculate net working capital. Any investment (increase) in net working capital is considered a cash outflow, while any use (decrease) of net working capital is considered a cash inflow. With that in mind, what are the cash flows generated by each of the three following items?
a. Accounts receivable fall by $1,000.
b. Inventories increase by $500.
c. Accounts payable increase by $2,000.
2. If equipment obtained exclusively for a project has a salvage value as of the end of the project, how will this affect cash flows? (Hint: the answer is NOT that there will be no effect.)