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Higher Colleges of Technology

ADMC Campus

EMBA 620: Corporate Finance

MID-TERM -TAKE HOME- EXAM

(Due Date: January 24, 2012)

INSTRUCTOR: Dr. ALEX PANANIS

email: alexandros.pananis@hct.ac.ae tel: 050 503 1730

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ALTERNATIVE ONE QUESTIONS FOR THE CASE: “Butler Lumber Company”

1) Why has this profitable company had to borrow so much money from the bank? 2) Do you agree with the estimate of the company’s loan requirement? 3) How much will he need to borrow to finance his expected expansion in sales ? (Assume

the sales volume for 1991 at $3.6 million as Mr. Butler anticipates) 4) How attractive is it to take the trade discounts? (Assume all purchase discounts will be taken from the period 01/04 to 31/12/1991)

5) As Mr. Butler’s financial adviser, would you recommend him to go ahead with, or to reconsider, his anticipated expansion and his plans for additional debt financing? 6) As the banker, would you approve Mr. Butler’s loan request, and, if so, what conditions would you put on the loan? 7) What are the alternatives open to Mr. Butler if Mr. Dodge turns down his request for an increased credit line? 8) What would you do as Mr. Butler?

ALTERNATIVE TWO

QUESTIONS FOR THE CASE: “Dell’s Working Capital”

1) Is Dell’s working capital management a competitive advantage and how it compares to Compaq? 2) How did Dell fund its growth in 1996? (hint: prepare pro-forma balance sheet based on 1995

data) 3) Assume that the company’s plans predict sales will grow by 50% in 1997, how might Dell

finance this growth internally? How much working capital need to be reduced and/or profit margin increased? (hint: assume savings from hypothetical working capital

improvements in 1996 actual; such as DSO, DSI, DPO as well as projected income statement based on 1996 data)

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