Answered: If Castle View currently does not have…

27th Edition

ISBN:9781337272094

Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Chapter11: Current Liabilities And Payroll

Section: Chapter Questions

Problem 11.5BPR: Payroll accounts and year-end entries The following accounts, with the balances indicated, appear in...

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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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