Question
Your consulting firm has been hired to evaluate a manufacturing process. In order to value the process, youve decided to value each piece separately. You
Your consulting firm has been hired to evaluate a manufacturing process. In order to value the process, youve decided to value each piece separately. You are currently evaluating the effect of inventory on the final value of the project. The process requires an initial amount of NWC of $500k. Each year, NWC will increase by $100k. The manufacturing process will be in operation for 10 years before shutting down. If the firms discount rate is 6%, what is the effect of the projects NWC on the total NPV of the project (in other words, what is the NPV of the NWC)?
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