Hi,
I have a doubt regarding this question. I have posted the link down:
https://www.accaglobal.com/content/dam/acca/global/pdf/p4_2010_dec_sample_q.pdf
I want to understand 1 thing:
1)"Thereafter every $1 increase in sales revenue will require a 10% increase in working capital."
What does this mean?
Waiting for a reply at the earliest.
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Allegro Technologies Co (ATC) NPV Question
12y ago#1The question is terribly badly worded because you could interpret it in different ways.
What the examiner wanted it to mean is that if (for example) the sales increase by $100, then we will need extra working capital of 10% x $100 = $10.
However, you could read it differently and the examiner would have to allow it. (This was only a sample, for real exams the examiner and markers have regular meetings and it would become obvious that people were reading it differently - they would then change the marking to still give people the marks).
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