A company anticipates sales for the latest venture to be Tk. 300,000 in the first year. Sales are then expected to increase at a rate of 8% per annum over the three-year life of the project. Working capital equal to 10% of annual sales is required and needs to be in place at the start of each year. Calculate the working capital related cash flows and find their present value if the cost of capital is 6%.
A company anticipates sales for the latest venture to be Tk. 300,000 in the first year. Sales are then expected to increase at a rate of 8% per annum over the three-year life of the project. Working capital equal to 10% of annual sales is required and needs to be in place at the start of each year. Calculate the working capital related cash flows and find their present value if the cost of capital is 6%.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 1P
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