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Total project cash flow

-$110,000

$51,780

$51,780

$20,000 in net working capital. The immediate outflow is thus $110,000. At the end of the project's life, the fixed assets will be worthless, but the firm will recover the $20,000 that was tied up in working capital.6 This will lead to a $20,000 inflow in the last year.

On a purely mechanical level, notice that whenever we have an investment in net working capital, that same investment has to be recovered; in other words, the same number needs to appear at some time in the future with the opposite sign.

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