• Profile photo of John Moffat says

      I know that the wording can be confusing, but whenever the examiner words it like this it means that they go up by 750,000 a year from what they currently are. Not that they go up by an extra 750,000 in each subsequent year.

      It is the same as this: suppose you currently earn 1,000 a month. I am your employer and I say that I will increase your salary by 250 a month. Surely you will then expect to be getting 1,250 a month. You will not think that I meant that you will get 1,250 next month, then 1,500 the following month, 1,750 the month after and so on :-)

    • Profile photo of John Moffat says

      Ba = Be Ve/(Ve + Vd(1-t)) from the formula sheet

      If you multiply both sides by (Ve + Vd(1-t)) and divide both sides by Ve, then you get
      Be = Ba (Ve + Vd(1-t)) / Ve

      We know Ba, Ve, Vd, and t. So now you can calculate Be

  1. avatar says

    Thank you for such a clear explanation. I would like to ask clarification on the working capital bit, you said that unless mentioned otherwise WC should be added back but when I check my calculations for question 1 of dec 2009 paper with suggested solutions, I realise they did not add the WC back. Would I have lost marks if I had not written I am assuming the extra WC will be just for the life of the project?
    Thanks in advance for your reply.

    Best Regards.

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