Cash Flow for Capital investment

CFA Level I Corporate Finance
#1

If a corporation is analyzing an investment, would a ‘change in net working capital’ be relevant in determining project cash flow?

This is from a CFAI sample exam so I cant reproduce the question but the according to the CFAI answer it is relevant in determining cash flows.

However i dont understand the connection. Please advice.

Thanks!

#2

Maybe you have to buy a bunch of inventory – raw materials, say – at the start of the project, and keep that inventory on hand until the project is completed. The increase in inventory (or, more accurately, the cash you have to spend for the increase in inventory) is a project cash flow.