Question

years 1-4 please!!!

Castle View Games would like to invest in a division to develop software for a soon-to-be-released video game console. To evaluate this decision, the firm first attempts to project the working capital needs for this operation. Its chief financial officer has developed the following estimates (in millions of dollars): (To copy the table below and use in Excel, click on icon in the upper right corner of table.) Year 1 Year 2 Year 3 Year 4 Year 5 15 1 10 15 15 19 23 24 24 23 1 2 3 4 Cash Accounts receivable Inventory Accounts payable 11 12 25 16 17 19 25 35 Assuming that Castle View currently does not have any working capital invested in this division, calculate the cash flows associated with changes in working capital for the first five years of this investment. (Note: Enter decreases as negative numbers.) The change in working capital for year 1 is $ million. (Round to the nearest integer.)

Answer 1

Net working capital is excess of current assets available over current liabilities.
Net working capital	Current assets - Current liabilities
Calculation of cash flow related to changes in working capital					In millions
Year	1	2	3	4	5
Cash	7.00	10.00	15.00	15.00	15.00
Accounts receivable	19.00	23.00	24.00	24.00	23.00
Inventory	6.00	9.00	11.00	12.00	16.00
Total current assets	32.00	42.00	50.00	51.00	54.00
Accounts payable	17.00	19.00	25.00	25.00	35.00
Net working capital	15.00	23.00	25.00	26.00	19.00
Cash flow related to WC	15.00	8.00	2.00	1.00	-7.00
	(15-0)	(23-15)	(25-23)	(26-25)	(19-26)
At end of year 6, company would recover $19 and thus net investment in working capital would be zero at end of year 6.
Summary (Year)	Cash flow
1	15.00	million
2	8.00	million
3	2.00	million
4	1.00	million
5	-7.00	million