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Net Working Capital Calculations

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You are opening your own business and estimate the following expenses and revenues:
Year 1 Year 2 Year 3
Revenues $900,000 $1,300,000 $1,100,000
Cost of goods sold $550,000 $800,000 $700,000

Accounts payable as a percentage of cost of goods sold........11%
Inventory as a percentage of cost of goods sold..................13%
Cash balance as a percentage of revenues.........................8%
Accounts receivables as a percentage of revenues...............15%
Accrued expenses as a percentage of revenues...................9%
All balances are needed in the year prior to the generation of the revenue and expense.
Please calculate the incremental investment in working capital needed for years 0,1,2,3. (you do not need to calculate the cash flow from operations - you do not have enough information to do this - only the incremental investment in working capital - all working capital accounts are liquidated at book value at the end of year 3)

Year 0_______________ Year 1_______________ Year 2__________________ and Year 3______________

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This response provides a step-by-step solution to compute a net working capital.

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