To forecast the required investment in net working capital (NWC), we need to calculate the balances for receivables and payables, then determine the NWC for each year.

The formula for NWC is:

$\text{NWC} = \text{Receivables} - \text{Payables}$

We are given:

• Receivables = 15.4% of Sales
• Payables = 14.5% of COGS

We will focus on Year 0 (since you’re asking for this specific year).

Step-by-Step Calculation

1. Calculate Receivables for Year 0:

$\text{Receivables (Year 0)} = 15.4\% \times \text{Sales (Year 0)}$ $\text{Receivables (Year 0)} = 0.154 \times 23,263 = 3,582.50$

2. Calculate Payables for Year 0:

$\text{Payables (Year 0)} = 14.5\% \times \text{COGS (Year 0)}$ $\text{Payables (Year 0)} = 0.145 \times 9,288 = 1,346.76$

3. Calculate NWC for Year 0:

$\text{NWC (Year 0)} = \text{Receivables (Year 0)} - \text{Payables (Year 0)}$ $\text{NWC (Year 0)} = 3,582.50 - 1,346.76 = 2,235.74$

Final Answer:

The required investment in net working capital (NWC) for Year 0 is:

$\boxed{2,235.74}$

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Would you like to see the NWC calculations for other years, or explore additional insights?

5 Related Questions:

1. How does NWC affect cash flow in investment projects?
2. What happens if receivables and payables ratios change over time?
3. How would Cisco optimize NWC to reduce cash constraints?
4. Why is it important to forecast NWC for project analysis?
5. How do payment terms with suppliers impact NWC?

Tip:

To maintain a healthy NWC, companies often aim to speed up receivables collection and negotiate longer payable terms with suppliers.