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Hello
Is it always assumed exchange rate at mid market rate?
Is it always assumed that working capital goes up with inflation (unless stated)?Regards
Both are assumptions, and as always in P4 if you state your assumptions you will still get the marks even if your answer is different from the examiners answer (provided, as always, that your workings are clear enough for the marker to follow).
As the examiner has written in his answer, the mid-market spot rates have been used simply for ease of computation.
With regard to the working capital, although it is an assumption, it is a standard assumption to make (read the “top tip” in workings 3.
Do appreciate that this question is from an exam 20 years ago – the examiner has changed twice since then!
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