To calculate the investment in net working capital (NWC) for Year 1, we use the formula:

$\text{Investment in NWC} = \text{(Accounts Receivable + Inventory)} - \text{Accounts Payable}$

For Year 1:

• Accounts Receivable (AR): $106.00
• Inventory (Inv): $131.00
• Accounts Payable (AP): $75.00

Substitute the values into the formula:

$\text{Investment in NWC (Year 1)} = (106 + 131) - 75$

$\text{Investment in NWC (Year 1)} = 237 - 75 = 162$

Investment in NWC for Year 1: $162

Let me know if you need further explanation or have questions!

Relative Questions:

1. How is the change in NWC calculated between different years?
2. Why is the final NWC reclaimed at the end of the project?
3. How does an increase in accounts payable affect NWC investments?
4. What are the implications of NWC investment on project cash flows?
5. How does inventory management impact NWC calculations?

Tip:

Always ensure all components of NWC are aligned with the same accounting period to avoid miscalculations!