Net Working Captial...AGAIN

I know this has been discussed here before, but I am still confused…NWCInv is calculated ex-cash and ex-debt for the FCFF and FCFE calculations, but what about capital budgeting? In the Schweser text it says that here too you should exclude cash and debt, but I am not seeing that anywhere in the CFA material.

In most capital budgeting questions they tell you Net working capital investment was XXX $, or something to that effect. there too, I would imagine it is (CA-Cash) - (CL - Debt) as in FCFE/FCFF calculations. My reasoning is as follows: Company is investing in a new project. It would use its cash, issue new debt. Over and above that, it needs to increase amount of inventories (CA Up), invest in receivables, change around payment terms to its suppliers (incurring an Accounts Payable), all of which are incremental increases over what they already have. Once the project completes - they rollback (a-la walmart) all the changes they made, so the return in NWCInv.

Capital budgeting WC is strictly CA - CL, or change of for exam purposes.

In every capital budgeting question to my recollection, a BS wasn’t provided. It was simply something along the lines of; inventory increased by $100, accounts payable decreased by $50, and accounts receivable increased by $25. Then just net out the change with CA-CL. But there have been many times when I was tripped up with the simplistic CA-CL for FCFF and FCFE. One HAS to exclude cash and notes payable/ current portion of debt.

True, ex-cash and ex-debt only apply for the FCFF and FCFE calculations. For capital budgeting, just use CA-CL.