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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Argnil Co – working capital (Sep/Dec 2015)
Hello Sir,
Q: Working capital investment of $150,000 will already exist at the start of the four-year period, due to the operation of the existing machine. This investment in working capital is expected to increase in nominal terms in line with the general rate of inflation at 4.7%.
The answer provided in the ACCA answer sheet is: Yr1: -7, Yr2: -7, Yr3: -8, Yr4: -8
However my tutor’s working indicates the following: Yr0: -7, Yr1: -7, Yr2: -8, Yr3: -8
With the explanation “because WC starts in Yr0”.
Which is the correct approach?
How do i identify clearly when WC should start?
Thank you.
The examiners answer is correct.
There already exists 150,000 at time 0 and so the first extra working capital occurs in 1 years time, at time 1.