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Let's suppose that the net working capital requirements for a project is the 20% of...

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Accounting

Let's suppose that the net working capital requirements for a project is the 20% of the projected annual sales for each year.

Let's suppose a project has a 4 years life period.

In cases we want to calculate the net working capital , we add only the changes in Net working capital for years 1-4.Why only the changes?

Why at time year=0 , we add the whole working capital requirements (20% X sales of next year)? Please try to explain it clearly?

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