Assume that over the life of project X, net working capital is maintained at an amount equal to the initial investment. If so, net working capital doesn't need to be included in the NPV computation, since the outflow at time zero is exactly (as we generally assume) offset by an equal inflow at the end of the project's life.

Question

Quizplus · Accepted Answer

Net working capital should be included in the NPV computation because it represents a cash flow that occurs at the beginning and the end of the project. The initial outlay for net working capital is a cash outflow, and its recovery at the end of the project is a cash inflow, both of which affect the project's net present value.

Assume That Over the Life of Project X, Net Working