Question

"if a company would need to increase net working capital to start a potential new project how should it be treated in the project's cash flow analysis?"

Answer 1

The net working capital should be treated as a cash outflow in addition to the project's initial capital outlay.

Step-by-step explanation:

The initial capital outflow is the funds invested in tangible asset in order that the project can see light of the day,that is the main capital requirement of such a project.

However, there could need for increase in net working capital in to order fund daily operations of the project before the project begin to yield cash inflows,such increase in net working capital should also be treated as cash outflow alongside the initial cash outflow of the project.