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    Net Working Capital, Change in NWC, and Capital Expenditures

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    Need help trying to figure out how certain figures were derived for net working capital, then the change in net working capital, and capital expenditures so I can figure out the free cash flows.

    (See attached file for full problem description)

    Question: I am suppose to figure out how $7,385 (from the year1999 to 2000) and $665 (for year2000 to 2001) is the change in net working capital is derived from the given information. The balance sheet below shows the data for 1998 and 1999. Information about future forecast for 2000 is that receivables, prepaid expenses, and other current assets should increase proportionately to sales, representing a combined 25 percent of future sales. (Sales for 2000 is $60,496) and as a result, accounts payable, accrued liabilities, and short-term notes payable should decline to 20 percent of future sales. These two percentages are the same for 2001 also.(Sales for 2001 are $73,805)
    I don't know if this is relevant to this question but, additional information is: On December 31,1999 the company owed $62.46 million in long-term senior and subordinated debt, including short-term notes due At that time, the company had $22 million in bank credit facilities available, but it had not yet borrowed against these available facilities It also has $81,000 in cash on its balance sheet.

    Taxes are 38.5 percent rate is expected/Cost of capital is 11.2 percent (again, I don't know if this is relevant to this particular question, but didn't want to leave it out just in case)

    I thought the equation to figure out net working capital is: Net working capital=inventory+accts. receivable-accts payable,

    and then take those results NWC for 1998 and substract from 1999 figure, and then proceed to find the change in NWC by using the %'s given for 2000 and then subtracting that, and then same for 2001?

    Please help, don't understand how $7,385 (2000) and $665 (2001) was derived!
    Could you also help me figure out how $8,167 (for 2000) and $9,964 (for 2001) for capital expenditures were derived?


    1998 1999


    Current assets

    Cash and Cash equivalents-$211 $81

    Accounts Receivable-$5,776 $6,564

    Pre-paid expenses and other assets-$334 $674

    Deferred income taxes-$367 $386

    Total Assets _______________ __________

    for 1998 - $6,688 $7,705

    Noncurrent Assets

    Plant, property, and equipment 61,830 67,189

    Other concurrent assets 1,246 1,312

    Total noncurrent assets __________ _________

    $63,076 $68,501
    Total assets __________ __________
    $69,764 $76,206


    Current Liabilities

    Current Portion of long-term debt-$4,589 $6,024

    Accounts Payable- $5,489 $6,334

    Acrued Liabilities $4,800 5,650

    Total Current Liabilities 14,878 18,008

    Noncurrent liabilities

    Long-term debt, less current portion-50,283 56,433

    Total concurrent liabilities $50,283 $56,433

    Total Liabilities ________ ___________
    $65,161 $74,441

    Shareholder's Equity
    Total Shareholder's Equity $4,603 $1,765

    Total liabilities and shareholder's
    Equity __________ _________
    $69,764 $76,206

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    Solution Summary

    The solution explains howo to calculate Net working capital, change in NWC, and capital expenditures given the balance for 2 years.