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TRAMONT CO(PILOT 12)
1. how did the answer get the working capital of 3600 in the year 1 ????
shouldn’t working capital be deducted 40,000 deducted at first year and increase as per annual inflation rate ???
The question says that 40,000 is needed immediately.
Immediately is at time 0 – the start of the first year (and a point in time – not a ‘year’).It will increase with the inflation rate, and so at the start of the second year, which is one year from now, and so is at time 1, more will be needed as per the answer.
It seems you are confused about timing, and because it is critical for the exam, you must watch the Paper F9 lectures on investment appraisal.
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