Hello,
Will someone please explain to me how NWC and Cumulative BCF are being calculated in the initial break-even analysis? I don't understand how the 20% of sales NWC is being accounted for each year and how that is being factored into the calculation.
Thanks for clarifying. There are still a few things I don't understand about the case. I might be missing a key assumption. If the change in net working capital is defined as [NWC of last fiscal year] - [NWC of the current fiscal year]. Why is NWC for 2026 and 2027 -80? If NWC from 2015 is -80 and NWC of 2026 is 20% of 2,402, then why isn't NWC for 2026 = -80 - 480 = -560? How should I be interpreting the fact that NWC per year is 20% of sales? Also if the initial investment is 320M + 100M = 420M how does the sum of EBITDA for the first 3 years of operation equivalent to 360M cover the 420M initial investment? Am I supposed to be using NWC as a current asset against the initial investment? Please help me understand the trends in NWC and why it's subtracted against EBITDA to determine business cash flow. I thought NWC was already accounted for in COGS + OH. Thank you for your time.