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Hi John
Can you please provide some help with the working capital calculation in the question above…
I understand that in Year 1 WC = 2112 (9600*22%)
In Year 2 WC= 2422 (2112*1.147) as inflation drops to 14.7%
In Year 3 WC = 2659 (2422*1.098) as inflation drops to 9.8%WC increased with inflation at the start of each next 3 years hence why I calculated wc as above for Year 1 and Year 2 but it is incorrect as I’m not getting same answer as examiner…
In question Tramont December 2011 Q1 WC is calculated as above… the only difference being that inflation % does not change year on year…
I know I’m missing some small detail.. I’d really appreciate your guidance here..
Many Thanks
AnnieThe extra working capital needed at time 1 is indeed 2112.
This means that the total working capital will then be 9600 + 2112 = 11712.
So at time 2 they will need an extra 11712 x 0.147 = 1722
This means the total working capital will then be 11712 + 1722 = 13434
So at time 3, they will need an extra 13434 x 0.098 = 1316Thank you John for the quick response and explanation..I understand it now..
Kind Regards
Anne
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