Terminal-year free cash flows may differ from the cash flows provided in the typical year of a project for reasons such as the return/repayment of increases/reductions in additional working capital in the prior years.

Question

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Terminal-year free cash flows can be influenced by changes in working capital that occurred in prior years and were either returned or repaid during the terminal year of the project. This can cause the cash flows in the terminal year to differ from a typical year's cash flows.

Terminal-Year Free Cash Flows May Differ from the Cash Flows