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	5	11	16	16	15
2	Accounts receivable	22	24	26	24	24
3	Inventory	5	7	10	13	16
4	Accounts payable	18	20	23	25	32

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. ​

The change in working capital for year 1 is _______ million. 

The change in working capital for year 2 is _______ million. 

The change in working capital for year 3 is _______ million. 

The change in working capital for year 4 is _______ million. 

The change in working capital for year 5 is _______ million

Please Include cash flow related to WC. thank you

Answer 1

Amounts in millions of dollars

Serial No	Particulars	Year 1	Year 2	Year 3	Year 4	Year 5
i	Current assets
ii	Cash (given)	5	11	16	16	15
iii	Accounts receivable (given)	22	24	26	24	24
iv	Inventory (given)	5	7	10	13	16
v	Total current assets (ii+iii+iv)	32	42	52	53	55
vi	Current liability
vii	Accounts payable (given)	8	20	23	25	32
viii	Total current liability (vii)	8	20	23	25	32
ix	Net working capital for current year (v-viii)	24	22	29	28	23
x	Net working capital for previous year	0	24	22	29	28
xi	Changes in working capital (ix-x)	24	-2	7	-1	-5