Reference no: EM132856541

Monty Corporation predicts the following revenues and cost of goods sold:

                                               Year     

                               1                   2                 3

Revenues       $180,000     $210,000    $240,000

Cost of goods sold $ 68,000  $ 79,000    $ 88,000

Using these revenues and costs as drivers, Monty predicts the following relationships:

1. 4 percent of revenues as a cash balance,
2. 11 percent of the cost of goods sold as an inventory balance,
3. 6 percent of the cost of goods sold as an accounts payable balance,
4. 5 percent of revenues as accrued expenses balance.

Question 1: All these balances would be needed at the beginning of each year and are estimated from the year-end annual estimates of revenues and cost of goods sold given above. The business will end at the end of year 3 and all working capital balances will be collected (or realized) at their face value. Please calculate the working capital balance needed and the incremental investment in working capital needed for years 0,1,2 and 3.