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Good day Sir
In NPV questions usually working capital is stated that it is needed at the start of the year.When that happens do we throw out the assumption that cashflows occur at the end of the period such that for the opening year discount factor is 1
It is only operating flows (i.e. revenues and expenses) that we assume occur at the ends of accounting periods, unless (obviously) told differently.
With regard to working capital, then (unless, again, told differently) it is required at the start of the year, and the start of the first year is time 0 (and therefore the discount factor is 1). (This is not throwing out any assumption 🙂 )
You really should watch my free lectures on investment appraisal, where all of this is explained, with examples. The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
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