Im doing a Uni assignment on corporate finance and I am a little confused about something so I was hoping that someone on here might be able to help

We've been asked to use capital budgeting techniques to evaluate two possible investments which are mutually exclusive and each are to remain in operation for 5 years.

The part that has me confused is the net working capital. The initial provision is $600,000 and it will increase in line with sales growth which is 8% per year.

To me this looks like this, only take 1 off the number to get the year i.e point one is the initial outlay.
[list=1]
[*]600000
[*]600000 x 1.08
[*]600000 x 1.08^2
[*]600000 x 1.08^3
[*]600000 x 1.08^4
[*]600000 x 1.08^5[/list=1]


This seems to make sense to me but then it says that the final balance will be recovered in one year after the projects end.

Does this mean that the cash inflow is not in the final year but actually after it so there is an extra year that needs to be added on i.e end of year 6? If so is there a sales income for this year?

If more information is needed I can make it available I just didn't have long to post this.


Thanks in advance.