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In this question, I wonder why it doesn’t release all the working capital at the end of year 4 when calculate the NPV of the investment.
ThanksIt is because the question says that the machine will be replaced. So presumably we will continue to produce the product and therefore still need the working capital.
(However the examiner did say that you would still get full marks if you had recovered the working capital (as we usually do), even though obviously the NPV would be different. )
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