AM I calculating the initial investment right?

I have the following to work with:

Total Revenue is 100,00. Expense is 40% of total revenue, working
capital is 20% of revenue in the following year and an immediate
investment in new equipment of 45,000.

This is how I figured my answer.

  100,000 (total revenue)
- 2,500 ( 40% expenses)
+ 20,000 (20% working capital)
- 45,000 immediate investment
___________
72,500 initial investment?


Thank you for any and all help.

Hi again baseball2!!!


You are mixing some apples with the oranges ;>))

The total initial investment (I) is the sum of the investment in plant
and/or equipment and the required Working Capital to start the
operations, and you must base your calculations on this definition.

In this case we have:
Investment in plant and/or equipment = $45,000
Working Capital required to start = 20% of the Revenues of Year 1 =
                                  = 0.20 * $100,000 =
                                  = $20,000

Then:
I = $45,000 + $20,000 = $65,000


Revenues and Expenses are used to calculate each year's cash flows, in
the following way, for each Year_i we have that:

CFi = Ri - Ei - Ti - ChWCi

where:
CFi = cash flow of year i
Ri = total revenues of year i
Ei = expenses of year i
Di = depreciation for the year i
Ti = taxes of year i = T * (Ri - Ei - Di)  with T = tax rate
ChWCi = Working Capital Change for year Yi =
      = Current WC - Previous Year WC


I hope that this helps you. Feel free to request for a clarification
if you need it.

Regards,
livioflores-ga

As always you are so dang helpful. I am sending another question
simular to this one just to make sure I am continuing in the right
path. It is different than this question so I don't want to just add
on without paying. Thanks!