Option 1: PFC management has stated that the new inventory control systems and consolidation of distribution could continue to improve inventory turnover days by 5 days. This improvement could possibly make up the deficiency: • Calculation is as follows: • Working Capital need formula as follows: (These are in thousands from Balance Sheet) • Inventory = (77,358,000 x .75) x (?/360) + Accounts Receivable = (77,358,000 x 74/360) ⚫ - Accounts Payable = (77,358,000 x .75 x .90) x (50/360) (These are now in actual dollars) = $ ? = $ ? =$? = $ ? =$-332,000 (Cash on Hand) Total Working Capital Need = $ ? Line of Credit Calculations . Inv. Advance Rate = (New Inv. from above) x .90 [Finished Goods] x.60 [Bank Advance Rate] =$? • Qualified AR advance = AR from above x .70 Total Collateral Available (-) Working Capital Need (Note: If within $250,000 deficiency, this is sufficient coverage to the Bank's satisfaction) Total Collateral =$? =$? ($151,487) $818.717 ($818,717) O ($77,355)

Option 1: PFC management has stated that the new inventory control systems and consolidation of distribution could continue to improve inventory turnover days by 5 days. This improvement could possibly make up the deficiency: • Calculation is as follows: • Working Capital need formula as follows: (These are in thousands from Balance Sheet) • Inventory = (77,358,000 x .75) x (?/360) + Accounts Receivable = (77,358,000 x 74/360) ⚫ - Accounts Payable = (77,358,000 x .75 x .90) x (50/360) (These are now in actual dollars) = $ ? = $ ? =$? = $ ? =$-332,000 (Cash on Hand) Total Working Capital Need = $ ? Line of Credit Calculations . Inv. Advance Rate = (New Inv. from above) x .90 [Finished Goods] x.60 [Bank Advance Rate] =$? • Qualified AR advance = AR from above x .70 Total Collateral Available (-) Working Capital Need (Note: If within $250,000 deficiency, this is sufficient coverage to the Bank's satisfaction) Total Collateral =$? =$? ($151,487) $818.717 ($818,717) O ($77,355)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter12: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 2STP

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