Question
Slick makes an initial year 0 investment of $10 million in inventories of plastic and steel for its blade plant. Then in year 1 it
Slick makes an initial year 0 investment of $10 million in inventories of plastic and steel for its blade plant. Then in year 1 it accumulates an additional $20 million of raw materials. The total level of inventories is now $10 million + 20 million. However, the cash expenditure in year 1 is simply the additional inventory of 20 million. Later on in year 5, the company begins planning its next generation blades. At this point, it begins reducing its inventory of raw material from 30 to 25. Calculate the cash flow from investments in working capital.
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Step: 1
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Step: 3
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