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Hi Sir;am struggling to understand the way the working capital was calculated in years 2 and 3 for Yilandwe (Jun 13).As its reducing instead of increasing.Not sure what inflation rates were applied.This is in conflict with the calculation of working capital in 2 and 3 for Tramont (Pilot 12).As Tramonts working capital was increasing.
Kindly assist
Thanks
On Yilandwe; I also dont understand how they calculated the $120 Contribution (part sales) in the question it says $40.The only way am getting the $120 is when i Calculate as follows:$280 – $200=$80
Then I add the $80 + $40 hich gives me $120 does it mean the incremenatal $80 Should be considered as extra contribution? I dont undertsnad the logic at all.Please assist.
Thanks
The working capital needed at time 0 is 9,600 as per the question.
The first years inflation rate is 22%, and so they then need an extra 22% x 9,600 = 2,112.
So they now have working capital of 9,600 + 2,112 = 11,712
The second years inflation rate is 14.7%, so they then need an extra 14.7% x 11,712 = 1,722
So they now have working capital of 11,712 + 1,722 = 13,434
The this years inflation rate is 9.8%, so they then need an extra 9.8% x 13,434 = 1,316
Imoni is currently charging $200 per unit and earns a contribution of $40, which means that the units are costing them $160.
In future they will be charging $280 per unit, and so the contribution in future will be $280 – $160 = $120.
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