Suppose that Linksys is considering the development of a wir

Suppose that Linksys is considering the development of a wireless home networking appliance, called HomeNet, that will provide both the hardware and the software necessary to run an entre home tom any Internet connection Linksys\'s receivables are 15.1% of sales and its payables are 15 7% f COGS. Forecast the reored investment in net working capital for HomeNet assuming that sales and cost of goods sold (COGS) will be as follows Year Sales COGS $23,252 $26,419$23,69 $10,680 $8,494 $3,434 9,577 $9,400 The required investment in net working captal for year O is s (Round to the nearest dollar.) The required investment in net working capital for year 1 is Round to the nearest dolar.) The required investment in net working capital for year 2 is S(Round to the nearest dolar) The required investment in net working capitail for year 3 is $(Round to the nearest dolar) The requred invesment in net working capital for year 4 is S? pound to the nearest dolar) Channel

Solution

Net working capital is invested in previous year for the next year. As in for year 1 the investment made is in year 0.

For the required investment in NWC we need to take the difference between the AR for the next year and the previous year and same goes with the Acc Payable.

For year 0 -> AR = 0 and AP = 0. So the required investment in NWC for year 0 = 0

For year 1 -> AR = 3511.052 and AP = 1475.8 , Now we take difference of AR and AP . SO the investment in NWC for year 1 = $ 2035.252

For year 2 -> AR = 3989.27 and AP = 1676.76 , similarly investment in NWC for year 2 = $ 2312.51

SImilarly for year 3 -> AR = 3577.34 and AP = 1503.59, So investment in NWC = $ 2073.75

Similarly for year 4 required investment in NWC = $743.56