How working capital affect incremental cash flow estimation, Financial Management

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How and why does working capital influence the incremental cash flow estimation for a planned large capital budgeting project?  Explain.

Many large projects need additional working capital.  This investment in additional working capital turns into a part of the initial investment.  This investment is recovered at the ending of the project’s life.  There may be some spontaneous raise in current liabilities related with a project, although the change in net working capital, if any, is similarly to be a positive value requiring an increase in the initial investment of that amount.


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