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F. Naz
F. Naz, Chartered Accountant
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Working on Conch Republic Electronics capital budgeting problem.

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Working on Conch Republic Electronics capital budgeting problem. I don't know how to figure the Investment in Working Capital.
Case study states NWC for the product will be 20 % of sales and will occur with the timing of the cash flows for the year; for example there is no initial outlay for NWC but changes in NWC will first occur in Year 1 with the first year's sales. Based on other information in problem I've calculated first year sales as $35.52M; do I subtract variable costs and depreciation from the 1st year's sales and take 20% of that amount to come up with the Investment in Working Capital? Does it change every year as the total sales per year change? UGH!

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