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You work for a company and your team has been asked to compute the cost impact on firm ratios of three different financing strategies for net working capital 18-Mar 18-Jun 18-Sep 18-Dec $500 1,000$2,500 S4,850$1,000 $6,350$4,000 $4,365 $1,200 1,822 $1,590 $1,985 $2,800 $500 $800 $500 $500 Minimum Cash Accounts Receivable Inventory CA CL NWC CA- CL $1,200 1,220 s2 $2,920 $4,200 1,098$2,610 Information for the assignment: Fixed loan interest rate is 4.00%. Any part of the loan not used to finance networking capital will invested at 2% in marketable securities which will be added to existing current asset to arrive a new current assets Line of Credit interest rate is 3.25% Fee on unused portion of line is 0.55%. Compensating balance is 5% of the borrowed funds. Interest rate earned on compensating balance is 1.75%. No line fee Line of credit is short-term financing and the line of credit, net of compensating balance requirements is a current liability. New current liabilities are the existing plus the line net of compensating balance requirement. The current ratio reflecting the financing strategy is the ratio of new current assets to the new current liabilities. EBIT is $424 Long term debt without any financing strategy is $5,000 Total Equity is $8,000

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