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Hello,
The question says that WC is 7% of the sales revenue. Hypothetically, if the question required us to calculate the SP sensitivity, then does WC effect the SP/sales revenue sensitivity calculation in any way?
SP sensitivity = NPV/ PV of sales revenue.
I don’t think it effects, but I just want to confirm
If the sensitivity had been required then the sensitivity would be the NPV / PV of all flows affected
So you would need the PV of not just the after-tax revenue flows but the working capital flows as well.
However, the Paper FM examiner has never made it so complicated (it is not hard but it just takes more time) and I do not imagine that he ever will 🙂
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