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Q:- the level of working capital investment at the start of the each year is expected to b 10% of the sale revenue in that year. If the sale revenue for the 1-4 Years respectively is £( 1308, 2817, 7907, 5443 ), what will be the working capital value for the each year in the investment appraisal computation?
N.B – this question is the part of past question, as I m not understanding this bit only , sir could u plz calculate this for me and explain it to me . Thanks
at the start of the first year (i.e. time 0) they need working capital of 10% x 1308 = 130.8.
At the start of the second year (i.e. time 1) they need working capital of 10% x 2817 = 281.7. However they already have 130.8, so they need an extra 281.7 – 130.8 = 150.9 at time 1.
At the start of the third year (i.e. time 2) they need 10% x 7907 = 790.7. But they already have 281.7 so they just need the extra.You should be able to finish it off from there 🙂
Many thanks for your back sir,
But more specifically the problem I’m facing is on year 3 and year 4 , as on the answer its given as follow
Year. 1. 2. 3. 4
Wc. (150.09) (509) 246 544I know how the figure is work out but didn’t get how they put this on yr 3 nd yr 4,
NB- on the wc amount I just put the round figure
at the start of the fourth year ie time 3 they need 10% of 5443=544.3 but they have already invested 790.7 in total so they take OUT the extra 246.4 (264) which is a cash inflow and lastly in time 4 they will take all of the 544 invested
hope that helps 🙂Dear Tutor,
I don’t get chapter 17 of FFM please can you help me with sums or so.
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