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In some answers when calculating the working capital amount we have to release the total amount in the final year. While in other answers we are not releasing that total. As far as I’ve noticed, there is no difference in the question. So can you tell me when and in which circumstances do I have to release the total amount of working capital?
In most questions the working capital is released at the end of the project, on the basis that the additional working capital (to cover inventory, receivables etc.) is no longer needed because production has come to an end.
However, there have been a few questions where the question has said things like “the machine will last 5 years, at which time it will be replaced”.
This statement implies that production of the product involved will continue, and that therefore the working capital will still be required (and therefore not released).It does mean reading the question terribly carefully (although to be fair, the last time this happened the examiner did say that full marks would be given whether or not answers released the working capital, even though his answer did not release it).
Hope that makes it clear 🙂
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