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Hi
could we be asked to calculate NPV using real terms approach?
and in June 2013 the Working capital is not added back at the final year why is this?
Thanks
JemmaBeing asked to calculate the NPV in real terms is possible but very unlikely.
In the June 2013 question, the reason that the working capital was not added back is that the first paragraph of the question makes it clear that things will continue in the future (the machine will need replacing) and therefore the working capital will presumably still be needed in the future.
If you were to have recovered the working capital as usual, then although the final answer would be different you would not lose more than 1 mark or so (if anything – I think you would probably still get full marks if everything else was correct).
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