- This topic has 1 reply, 2 voices, and was last updated 4 years ago by
.
- Posts
Hi.. in the NPV section, suppose we have to take working capital of 200$ for 5 years, I wanted to understand why do we take WC one year in advance and release everything at the end of 5th year?
If you are referring to the chapter in our free lecture notes, then I trust that you are not using the notes without watching the lectures that go with them – that would be completely pointless 🙂
Working capital is not taken one year in advance. Unless told differently in a question, working capital is needed at the start of the first year, which is time 0. It is needed throughout the life of the project in order to finance the inventory etc., but is no longer needed at the end of the project and so is recovered at the end of the final year.
I think it may help you to watch the paper FM lectures on investment appraisal because this is pure revision from Paper FM.
- You must be logged in to reply to this topic.