Question

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
1	Cash	66	1010	1616	1414	1616
2	Accounts receivable	2020	2525	2525	2121	2626
3	Inventory	55	77	1212	1313	1616
4	Accounts payable	1616	2020	2424	2525	3434

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

Change in Net Working Capital:

Change in Working Capital for Year 1 is $525

Change in Working Capital for Year 2 is $1,067

Change in Working Capital for Year 3 is $1,337

Change in Working Capital for Year 4 is -$606

Change in Working Capital for Year 5 is $101