DCF:Inflation and Working Capital

Dear Sir

This is a practical question that I appreciate may be unlikely to come up in an exam but is of relevance in practical application and I would hugely recommend appreciate your help in establishing the best approach:

When preparing a DCF for a 3 year construction project, that has fixed income per period (based on a lump sum construction contract) and individual operating cash flows already inflated at specific rates based on current economic estimates (eg labour 5%, materials 10%, expenses 7%, comping), what would be the most appropriate discount rate to use?

I plan to use taxation in my model.

In terms of working capital, I plan to use a10% value based on sales, but given the project finishes in year 3 yet the retention won’t be received until year 5, should I continue to show working capital equal to the retention value in year 4?

I hope you can help, thanks in advance and please feel free to point me to any notes or lectures that cover this is I’ve missed them.

Thank you!