Mary is considering opening a grocery store. The store is expected to generate revenues of $200,000, $250,000, $260,000, $250,000 and $200,000 during year 1, year 2, year 3, year 4, and year 5 respectively. Net working capital requirement for operating the store is estimated as below:
Cash 12% of revenue
Account receivables 25% of revenue
Inventory 50% of revenue
Account payables 60% of inventory
Mary plans to operate the store for 5 years and then close. Please calculate cash flows (year 0 through year 5) related to working capital (CFWC) for Mary’s grocery store project. For simplicity, assume all working capital investments can be recovered fully at the end of the project.