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In the event the working capital needed at the start of the project inflate by (say) 6%, what will we include in our cash flow chart from year 1 to the end of the project? should we consider only the inflation(incremental) amount year on year, provide the initial cost in nominal term at time 0 and then recover the whole inflated figure of the year preceding the end year at the end year?
If working capital is inflating then the outflow each year (after the initial outflow) is the extra amount needed to inflate the total to the new total.
At the end of the project we assume that the total of the cash outflows is recouped.
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