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in December 2013 f9 exam question 1 (a)how can i calculate working capital incremental ?
Thank in advance
The revenue in the first year is 1308.75.
So the working capital needed at the start of the first year – i.e. time 0 (now) is 10% x 1308.75 = 130.88The revenue in the second year is 2817.26.
So the working capital needed at the start of the second year (which is in one years time – i.e. time 1) is 10% x 2817.26 = 281.73.However we already have working capital of 130.88, so the extra needed at time 1 is 281.73 – 130.88 = 150.85
And so on…. 🙂
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