Answered: If Castle View currently does not have…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 estimates (in millions of dollars).

If Castle View currently does not have any initial working capital invested in this division, calculate the cash flows associated with changes in working capital for the first five years of this investment.

Year 1
Year 2
Year 3
Year 4
Year 5
Cash
6
12
15
15
15
Accounts receivable
21
22
24
24
24
Inventory
5
7
10
12
13
Accounts payable
18
22
24
25
30

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