Castle View Games would like to invest in a division to develop software for vid

Question

Castle View Games would like to invest in a division to develop software for video games. 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 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)

Explanation / Answer

Here negative closing cash means no need to arrage additional working capital cash are enough.

Year -1 Year-2 Year-3 Year-4 Year-5 Cash 4 12 16 14 15 Add : Decrese in account receivable 22 26 25 23 25 Less:Increase in inventory 5 9 10 13 13 Less :Increase in account payable 17 22 25 28 32 Working Capital still require 4 7 6 -4 -5

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