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Here the working capital is used at T0 and then the yr 5? why at yr 5
How do u know that u should use such approach, sometimes in some question u use Wc throughout the yrs? 1 2 3 4 5 yrs
how do u get the hint?
Question 2, selling price to sensitivity
NPV is after tax, so tax liability from revenue also should be considered.
Question- why do you take the liability and then discount it to a yr?
You must watch the free lectures because I cannot type out all the lectures here!
We always assume (unless told otherwise) that all the working capital is recovered at the end of the project.
If there is more working capital needed during the project then the question will tell you. This question does not mention the need for any more working capital and so there is only the initial outflow.Again, there is a whole lecture on investment appraisal under uncertainty (just as there is a whole lecture on investment appraisal with working capital).
We always calculate the sensitivity by taking the NPV as a % of the PV of the cash flows that change. (The logic of why we do this is explained in the lecture).
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