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Hello, I have a question regarding recoupment of working capital at the end of project in NPV calculation. Why exactly do we recoup working capital? As this is not sale of asset at the end of project but it is still treated as cash inflow in NPV calculation.
Thank you!As I explain in my free lectures, the working capital is needed to that they can hold extra inventory and finance extra receivables while the project exists. Once the project finishes, they no longer need the extra inventory and won’t have the extra receivables, so the working capital is released.
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