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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)

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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?

Could you also help me figure out how \$8,167 (for 2000) and \$9,964 (for 2001) for capital expenditures were derived?

BALANCE SHEET

1998 1999

ASSETS

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

Liabilities

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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