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In addition to the initial cost of the new machinery, initial investment in working capital of $500,000 will be required.
Investment in working capital will be subject to the general rate of inflation, which is expected to be 4·7% per yearYear 1 2 3 4
$000 $000 $000 $000Working capital 523·50 548·11 573·87 600·84
Incrementa 24 25 26 27
i did 23.5 24.5 26 574
now im confused as i learned from some paper and i asked you here/. please why is it different? why the balance is not recuperated at the end?The examiner did not recover the working capital because the machine will be replaced and therefore the product will still be being made and therefore presumably the working capital will still be needed.
However the examiner did say that if you had recovered the working capital then you will still be given full marks.
Ok.that means when the production continues the working capital isn’t recovered.understood.thanks a lot ?
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