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Sir,
when we calculate Inflated sales and inflated V.C
could we inflate it directly in our format (eg put “inflated by x%” near sales and V.C and calculate it directly in our calculatorOR, should we do it in separate workings like we see in examiners answer 🙁
What I would do is show the workings for one of them (to prove you know what you are doing, because in the middle of an exam you might have misread something). The others I would just do on my calculator 🙂
John
I get confuse sometime when examiner include working capital in investment appraisal
if it give just a figure like that
then I just deduct it from PVs
and add it last year
BUT sometime we take it on incremental sales that’s fine
but sometimes it is there for all years deduct it and in last year….ADD all in last years and add back to last year
clear me on working capital in investment appraisal sir
when to add last year and when do notFirst, you do not deduct it from the PV’s.
Any money needed for working capital is deducted from the cash flows. (And then we calculate the PV of the net cash flow).
Secondly, in the final year we assume that working capital is no longer needed and so you recover all of the working capital previously paid. Unless, of course, you are told not to – this is unlikely, but it was the case in one question that you were told to ignore the recovery of working capital.
Thanks Sir, understand it now 😉
Sir, does examiner cut marks if we put a wrong figure but our steps/method are correct
maybe in hurry we’ve put a wrong figure
whole answer will be in mess
does it cut marks sir?Most of the marks are for the approach. Little arithmetic mistakes do lose marks, but very few marks.
For this reason, it is very important to set out your workings neatly – even if the numbers are wrong, you will still get most of the marks if your approach is correct, but only if the marker can see your approach 🙂
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