I don't understand the working capital outflows. In my kit it says the working capital flows will be (23),(23),(24) and 820 in years 1-4. I thought there would only be initial investment of 750 in year 0 and then it will be released in year 4 so 844 due to inflation..
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5y ago#1In future you must tell me which exam the question is coming from or if it is in the BPP Revision Kit then the number of the question. I cannot remember the name of every question there has ever been :-)
The selling price and variable costs are inflating at 3% a year and therefore we would expect the required working capital to inflate at 3% also (more sales result in more receivables etc.)
The initial requirement is 750 and therefore at time 1 they will need another 3% x 750. At time 2 they will need an addition 3% of the new total, and so on.
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