Question
Royal Mount Games would like to invest in a division to develop software for video games. To evaluate this decision, the firm first attempts to
Royal Mount 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 |
| ||
1 | Cash | 4 | 10 | 16 | 16 | 14 | |
2 | Accounts receivable | 22 | 22 | 24 | 22 | 26 | |
3 | Inventory | 6 | 7 | 10 | 13 | 13 | |
4 | Accounts payable | 18 | 22 | 24 | 25 | 34 |
Assuming that Royal Mount 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. (Enter increases as negative numbers since they are uses of cash.)
The cash flow associated with the change in working capital for year 1 is $___million. (Round to the nearest integer.)
The cash flow associated with the change in working capital for year 2 is $___million.(Round to the nearest integer.)
The cash flow associated with the change in working capital for year 3 is $___million. (Round to the nearest integer.)
The cash flow associated with the change in working capital for year 4 is $___million. (Round to the nearest integer.)
The cash flow associated with the change in working capital for year 5 $___million.(Round to the nearest integer.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started