Question

The following table shows project working capital requirements for a 2-year project at Hoosier Tire. The firm expects to reclaim its final NWC position at the end of the project.

Year	0	1	2
Accounts Receivable	$24.00	$102.00	$168.00
Inventory	$93.00	$139.00	$103.00
Accounts Payable	$26.00	$67.00	$100.00

What is the investment in NWC for year 0? (express as a positive number for answer)

What is the investment in NWC for year 1?(express answer as a positive number)

Answer 1

Net Working Capital = Accounts Receivable + Inventory - Accounts Payable

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

A В C E 1 2 Year-O Year-1 Accounts Receivable $24.00 $102.00 4 $93.00 Inventory Accounts payable $139.00 $26.00 $67.00 6 $91.00 $174.00 Investment in NWC 7 9 10 st LC LC

Cell reference -

A В D 2 Year-0 Year-1 Accounts Receivable Inventory Accounts payable 24 4 102 5 93 139 26 67 =SUM(C4:C5)-C6 -SUM(D4:D5) -D6 7 Investment in NWC

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.