Castle View Games would like to invest in a division to develop software for a...
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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) (see the table below). Assume 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. (Hint: Calculate Subtract change in NWC.)
Cash flows associated with changes in NWC (i.e., Subtract change in NWC)
Year
0
1
2
3
4
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
Level of NWC
Change in NWC
Cash flows associated with changes in NWC (i.e., Subtract change in NWC)
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