Suppose that Linksys is considerering the development of a wireless home network

Question

Suppose that Linksys is considerering 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 14.5% of sales and its payables are 15.5% 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: The required investment in net working capital for year 0 is.(Round to the nearest dollar.) The required investment in net working capital for year 1 is.(Round to the nearest dollar.)

Explanation / Answer

To compute the required investment in net workng Capital we have to obtain the current asssets & current liabilites From the given information we can get the accounst receivable % accounst Payable The required investment in net working capital for Year 0 is $ 0 The required investment in net working capital for Year 1 is , Accounts Receivable = 23,575*14.5% 3536.25 Accounts Payable = 9,530 X 15.5% 1477.15 Here we assume that all goods are purchase are sold , so there is no inventoriies So, Net Working Capital = 3536.25-1477.15 $2,059

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