Question

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 entire home from any internet connection Linksys's receivables are 15.2% of sales and its payables are 14.4% of COGS. Forecast the required investment in net working capital for HomeNet assuming that sales and cost of goods sold (COGS) will be as follows: Year Sales COGS $23,509 $9,504 $26,502 $10,714 $23,778 $9,612 $8,377 $3,386 The required investment in net working capital for year is $ (Round to the nearest dollar)

solve for all years. 4 parts remaining

Answer 1

Working capital required in each year = receivables - payables.

Change in working capital requirement each year = Working capital required in next year - Working capital required in current year.

A C E G Working Capital Required Change in Working Capital Requirement Receivables Payables 1 Year Sales COGS 2 0 1 $23,509 2 $26,502 $10,714 $9,504 $3,573.37 $1,368.58 $1,542.82 $2,485.49 $2,204.79 $2,204.79 $280.70 $4,028.30 4 3 $23,778 $9,612 $3,614.26 $1,273.30 $1,384.13 $2,230.13 ($255.36) ($1,444.41) 5 $8,377 $3,386 $487.58 $785.72 6 4 LO LO

C D E G change in Working Capital Requirement Working Capital Required Receivables Sales Payables COGS 1 Year 2 0 -D3-E3 -B3 15.2% C3*14.4% |=F3 - F2. 3 1 23509 9504 B4*15.2% -C4*14,4% 4 2 26502 10714 D4-E4 F4-F3 C5*14,4% B5 15.2% 5 3 23778 9612 -D5-E5 F5-F4 -B6*15.2% C6*14.4% 6 4 8377 3386 =D6-E6 =F6-F5