Working capital requirements: There will be an initial working capital requirement of $100,000 just to get production started. Then, for each year, the total investment in net working capital will be equal to 10 percent of the dollar value of sales for that year. Thus, the investment in working capital will increase during years 1 through 3, then decrease in year 4. Finally, all working capital is liquidated at the termination of the project at the end of year 5. The depreciation method: We use the simplified straight-line method over 5 years. It is assumed that the plant and equipment will have no salvage value after 5 years. Thus, annual depreciation is $2,000,000/year for 5 years