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The method for figuring working capital investments in capital budgeting calls for "reversion" (that is, just...

The method for figuring working capital investments in capital budgeting calls for "reversion" (that is, just reversing the amount) of the working capital investment assumption when the project is finished. Why? The project is done. Why mess with this?

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Answer #1

This is done to account for the fact that most projects require an initial investment in working capital, along with the initial fixed asset investment. At the end of the project, the working capital is released from the project (it is "recovered").  

The initial investment in working capital is a cash outflow, and the recovery at the end of the project's life is a cash inflow.

This is similar to the treatment for the fixed asset investment, where the initial project cost is a cash outflow, and the salvage value is a cash inflow.

The investment in working capital is essentially a cash outflow, since cash is locked up which could be used elsewhere. The recovery of working capital is due to the release of funds from working capital, and is hence treated as a cash inflow

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