NPV: taxation, working capital, inflation - part 2
Taught by Nick Drape · AI tutor support included
In this lesson, you'll learn how working capital affects investment project cash flows and why it matters for your NPV calculations in Performance Management and Strategic Business Leader exams.
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In this lesson
- 0:00 Working capital explained simply
- 1:20 Three key cash flow stages
- 4:16 Calculating working capital requirements
- 5:23 Initial investment and timing
- 8:03 Project wind-down and release
- 9:18 Practice example with fluctuating requirements
About this lesson
Working capital represents the money you need to invest upfront to keep a project running—think inventory and customer credit periods. The key insight is that working capital requirements change throughout a project's life, creating additional cash flows you must account for. You'll discover three critical timing points: an initial cash outflow at the project start, incremental adjustments at the beginning of each year (outflows if requirements increase, inflows if they decrease), and a final cash inflow when all working capital is released at project end. By working through practical examples, you'll learn to calculate these movements accurately and verify your answer by checking that all working capital cash flows sum to zero—a useful confidence check before you submit exam answers.
Duration: 13m
Transcript
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