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I have a very simple model that has a feature class iterator (recursive) that runs through a directory and sub-folders looking for line files and then projects them to UTM_16N. The only issue with the model is the destination for the output files.
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Instead of having all the outputs going to a single destination I want them to be created in the source folder. So basically the model would dump the output in the same folder as the source file.

There are hundreds of folders each containing an individual line file and they all have the same name. The only identifier so to speak is the container folder name (counties in this case).

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You need a subtle change to your model. See the image below:

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Configure Expression parameter of Calculate Value like this:

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Set Output Dataset or FeatureClass parameter of Project tool to %output_value%

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