OKAN CO (SEP/DEC 19)

The question says that the initial working capital is 10% of the year 1 sales revenue. Therefore the working capital at time 0 is 10% x 17325 = 1,733. The question also says that there will be an increase or reduction in working capital of 15% for every $1 increase or decrease in sales revenue. The revenue in the second year is 34304 which is an increase of 34304 - 17325 = 16979. Therefore extra working capital is needed at time 1 of 15% x 16979 = 2,547. The revenue in the third year is 62,980 which is an increase of 62890 - 34304 = 28586. Therefore extra working capital is needed at time 2 of 15% x 28586 = 4,288. It is the same workings for the remaining years.

In the final year we get back any remaining working capital (as is always the case).