CHAPTER18 SHORT-TERM FINANCE AND PLANNING

Learning Objectives LO1 LO LO! LO" LO# The operating and cash cycles and why they are important. The different types of short-term financial policy. The essentials of short-term financial planning. The sources and uses of cash on the balance sheet. The different types of short-term borrowing.

Ans$ers t% C%nce&ts Revie$ an' Critica( T)in*ing +,esti%ns 1.LO1/ These are firms with relatively long inventory periods and/or relatively long receivables periods. Thus, such firms tend to keep inventory on hand, and they allow customers to purchase on credit and take a relatively long time to pay. .LO1/ These are firms that have a relatively long time between the time purchased inventory is paid for and the time that inventory is sold and payment received. Thus, these are firms that have relatively short payables periods and/or relatively long receivable cycles. .LO"/ a. Use: b. c. d. e. ""ource: Use: Use: Use: The cash balance declined by $ !! to pay the dividend. The cash balance increased by $#!!, assuming the goods bought on payables credit were sold for cash. The cash balance declined by $$!! to pay for the fi%ed assets. The cash balance declined by $& # to pay for the higher level of inventory. The cash balance declined by $', !! to pay for the redemption of debt.

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.LO / (arrying costs will decrease because they are not holding goods in inventory. "hortage costs will probably increase depending on how close the suppliers are and how well they can estimate need. The operating cycle will decrease because the inventory period is decreased. .LO1/ "ince the cash cycle e)uals the operating cycle minus the accounts payable period, it is not possible for the cash cycle to be longer than the operating cycle if the accounts payable period is positive. *oreover, it is unlikely that the accounts payable period would ever be negative since that implies the firm pays its bills before they are incurred. .LO1/ It lengthened its payables period, thereby shortening its cash cycle but had no affect on the operating
cycle. .

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012-

.LO1/ Their receivables period increased, thereby increasing their operating and cash cycles. .LO1/ +t is sometimes argued that large firms ,take advantage of- smaller firms by threatening to take their business elsewhere. .owever, considering a move to another supplier to get better terms is the nature of competitive free enterprise.

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.LO1/ They would like to/ The payables period is a sub0ect of much negotiation, and it is one aspect of the price a firm pays its suppliers. 1 firm will generally negotiate the best possible combination of payables period and price. Typically, suppliers provide strong financial incentives for rapid payment. This issue is discussed in detail in a later chapter on credit policy.

14- .LO1/ 2lue"ky will need less financing because it is essentially borrowing more from its suppliers. 1mong other things, 2lue"ky will likely need less short-term borrowing from other sources, so it will save on interest e%pense. S%(,ti%ns t% +,esti%ns an' Pr%b(e5s NOTE: All end of chapter problems were solved using a spreadsheet. Many problems require multiple steps. ue to space and readability constraints! when these intermediate steps are included in this solutions manual! rounding may appear to have occurred. "owever! the final answer for each problem is found without rounding during any step in the problem. Basic 1.LO"/ a. 3o change. 1 dividend paid for by the sale of debt will not change cash since the cash raised from the debt offer goes immediately to shareholders. b. c. d. e. f. g. h. i. #. $. l. m. n. o. 3o change. The real estate is paid for by the cash raised from the short term debt, so this will not change the cash balance. 3o change. +nventory and accounts payable will increase, but neither will impact the cash account. 4ecrease. The short-term bank loan is repaid with cash, which will reduce the cash balance. 4ecrease. The payment of ta%es is a cash transaction. 4ecrease. The preferred stock will be repurchased with cash. 3o change. 1ccounts receivable will increase, but cash will not increase until the sales are paid off. 4ecrease. The interest is paid with cash, which will reduce the cash balance. +ncrease. 5hen payments for previous sales, or accounts receivable, are paid off, the cash balance increases since the payment must be made in cash. 4ecrease. The accounts payable are reduced through cash payments to suppliers. 4ecrease. .ere the dividend payments are made with cash, which is generally the case. This is different from part a where debt was raised to make the dividend payment. 3o change. The short-term note will not change the cash balance. 4ecrease. The utility bills must be paid in cash. 4ecrease. 1 cash payment will reduce cash. +ncrease. +f marketable securities are sold, the company will receive cash from the sale.

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2.

.LO!/ The total liabilities and equity of the company are the net book worth, or market value of equity, plus current liabilities and long-term debt, so: Total liabilities and e)uity 6 $'7, !# 8 ',&7! 8 9, !! Total liabilities and e)uity 6 $ 7,!7# This is also e)ual to the total assets of the company. "ince total assets are the sum of all assets, and cash is an asset, the cash account must be e)ual to total assets minus all other assets, so: (ash 6 $ 7,!7# : ';,79! : <, !# : ,#;# : ',&7! (ash 6 $',<#! 5e have 35( other than cash, so the total 35( is: 35( 6 $ ,#;# 8 ',<#! 35( 6 $<,! # 5e can find total current assets by using the 35( e)uation. 35( is e)ual to: 35( 6 (1 : (= $<,! # 6 (1 : $',&7! (1 6 $#,&##

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.LO1/ a. +ncrease. +f receivables go up, the time to collect the receivables would increase, which increases the operating cycle. b. c. d. e. f. +ncrease. +f credit repayment times are increased, customers will take longer to pay their bills, which will lead to an increase in the operating cycle. 4ecrease. +f the inventory turnover increases, the inventory period decreases. 3o change. The accounts payable period is part of the cash cycle, not the operating cycle. 4ecrease. +f the receivables turnover increases, the receivables period decreases. 3o change. >ayments to suppliers affects the accounts payable period, which is part of the cash cycle, not the operating cycle.

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.LO1/ a. +ncrease? +ncrease. +f the terms of the cash discount are made less favorable to customers, the accounts receivable period will lengthen. This will increase both the cash cycle and the operating cycle. b. +ncrease? 3o change. This will shorten the accounts payable period, which will increase the cash cycle. +t will have no effect on the operating cycle since the accounts payable period is not part of the operating cycle.

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c. d.

4ecrease? 4ecrease. +f more customers pay in cash, the accounts receivable period will decrease. This will decrease both the cash cycle and the operating cycle. 4ecrease? 4ecrease. 1ssume the accounts payable period does not change. @ewer raw materials purchased will reduce the inventory period, which will decrease both the cash cycle and the operating cycle. 4ecrease? 3o change. +f more raw materials are purchased on credit, the accounts payable period will tend to increase, which would decrease the cash cycle. 5e should say that this may not be the case. The accounts payable period is a decision made by the companyAs management. The company could increase the accounts payable account and still make the payments in the same number of days. This would leave the accounts payable period unchanged, which would leave the cash cycle unchanged. The change in credit purchases made on credit will not affect the inventory period or the accounts payable period, so the operating cycle will not change. +ncrease? +ncrease. +f more goods are produced for inventory, the inventory period will increase. This will increase both the cash cycle and operating cycle.

e.

f. #-

.LO!/ a. 1 <#-day collection period implies all receivables outstanding from the previous )uarter are collected in the current )uarter, and: B$! : <#C/$! 6 '/ of current sales are collected. "o: %& $7'!.!! ; !.!! B&;!.!!C $7&!.!! %' $7&!.!! ;#!.!! B;7#.!!C $7;#.!! %( $7;#.!! 97!.!! B;$!.!!C $<'#.!! %) $<'#.!! $'!.!! B9;!.!!C $<##.!!

2eginning receivables "ales (ash collections Dnding receivables b.

1 &!-day collection period implies all receivables outstanding from previous )uarter are collected in the current )uarter, and: B$!-&!C/$! 6 '/7 of current sales are collected. "o: %& $7'!.!! ; !.!! B##!C $<9!.!! %' $<9!.!! ;#!.!! B;7!.!!C $#!!.!! %( $#!!.!! 97!.!! B;;&.&;C $##7.77 %) $##7.77 $'!.!! B9#&.&;C $&!&.&&

2eginning receivables "ales (ash collections Dnding receivables

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c.

1 7!-day collection period implies all receivables outstanding from previous )uarter are collected in the current )uarter, and: B$!-7!C/$! 6 /7 of current sales are collected. "o: %& $7'!.!! ; !.!! B;$!.!!C $ <!.!! %' $ <!.!! ;#!.!! B;<!.!!C $ #!.!! %( $ #!.!! 97!.!! B9!7.77C $ ;&.&; %) $ ;&.&; $'!.!! B997.7<C $7!7.77

2eginning receivables "ales (ash collections Dnding receivables 0-

.LO1/ The operating cycle is the inventory period plus the receivables period. The inventory turnover and inventory period are: +nventory turnover 6 (EF"/1verage inventory +nventory turnover 6 $&$,79 /GH$'!,#97 8 ' ,'< I/ J +nventory turnover 6 &.'!& times +nventory period 6 7&# days/+nventory turnover +nventory period 6 7&# days/&.'!& +nventory period 6 #$.;; days 1nd the receivables turnover and receivables period are: Keceivables turnover 6 (redit sales/1verage receivables Keceivables turnover 6 $$;,79'/GH$#,'7! 8 #,7<!I/ J Keceivables turnover 6 '9.&!'$ times Keceivables period 6 7&# days/Keceivables turnover Keceivables period 6 7&# days/'9.&!'$ Keceivables period 6 '$.& days "o, the operating cycle is: Eperating cycle 6 #$.;; days 8 '$.& days Eperating cycle 6 ;$.7$ days The cash cycle is the operating cycle minus the payables period. The payables turnover and payables period are: >ayables turnover 6 (EF"/1verage payables >ayables turnover 6 $&$,79 /GH$;, !# 8 ;,&7!I/ J >ayables turnover 6 $.7#79 times >ayables period 6 7&# days/>ayables turnover >ayables period 6 7&# days/$.7#79 >ayables period 6 7$.! days

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"o, the cash cycle is: (ash cycle 6 ;$.7$ days : 7$.! days (ash cycle 6 <!.7; days The firm is receiving cash on average <!.7; days after it pays its bills. 1.LO#/ +f we factor immediately, we receive cash on an average of $ days sooner. The number of periods in a year are: 3umber of periods 6 7&#/ $ 3umber of periods 6 ' .#9& The D1K of this arrangement is: D1K 6 B' 8 >eriodic rateCm : ' D1K 6 B' 8 '. #/$9.;#C' .#9& : ' D1K 6 .';'# or ';.'#L 2.LO!/ a. The payables period is Mero since the company pays immediately. The payment in each period is 7! percent of ne%t periodAs sales, so: %& >ayment of accounts b. $ &'.!! %' $ <$.!! %( $ ;$.!! %) $ ; .##

"ince the payables period is $! days, the payment in each period is 7! percent of the current periodAs sales, so: %& >ayment of accounts $ 7;.!! %' $ &'.!! %( $ <$.!! %) $ ;$.!!

c.

"ince the payables period is &! days, the payment in each period is /7 of last )uarterAs orders, plus '/7 of this )uarterAs orders, or: Nuarterly payments 6 /7B.7!C times current sales 8 '/7B.7!C ne%t period sales. %& >ayment of accounts $ <#.!! %' $ #;.!! %( $ #$.!! %) $ ;&.9#

3-

.LO!/ "ince the payables period is &! days, the payables in each period will be: >ayables each period 6 /7 of last )uarterAs orders 8 '/7 of this )uarterAs orders >ayables each period 6 /7B.;#C times current sales 8 '/7B.;#C ne%t period sales %& >ayment of accounts 5ages, ta%es, other e%penses =ong-term financing e%penses Total $'#77.;# 79&.!! $!.!! $ ,!!$.;# %' $'#$! <##.!! $!.!! $ ,'7# %( $' 9# 7& .!! $!.!! $',;7; %) $' $;.#! 7!<.!! $!.!! ',&$'.#!

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14- .LO!/ a. The 3ovember sales must have been the total uncollected sales minus the uncollected sales from 4ecember, divided by the collection rate two months after the sale, so: 3ovember sales 6 B$9&,!!! : #$,!!!C/!.'# 3ovember sales 6 $'9!,!!! b. The 4ecember sales are the uncollected sales from 4ecember divided by the collection rate of the previous monthsA sales, so: 4ecember sales 6 $#$,!!!/!.7# 4ecember sales 6 $'&9,#;'.<7 c. The collections each month for this company are: (ollections 6 .'#B"ales from months agoC 8 . !B=ast monthAs salesC 8 .&# B(urrent salesC

Oanuary collections 6 .'#B$'9!,!!!C 8 . !B$'&9,#;'.<7C 8 .&#B$'$#,!!!C Oanuary collections 6 $'9;,<&<. $ @ebruary collections 6 .'#B$'&9,#;'.<7C 8 . !B$'$#,!!!C 8 .&#B$ '#,!!!C @ebruary collections 6 $ !<,!7#.;' *arch collections 6 .'#B$'$#,!!!C 8 . !B$ '#,!!!C 8 .&#B$ 79,!!!C *arch collections 6 $ &,$#! 11- .LO!/ The sales collections each month will be: "ales collections 6 .7#Bcurrent month salesC 8 .&!Bprevious month salesC Fiven this collection, the cash budget will be: April $'' ,!!! &,9!! $779,9!! $'7<,!!! <7,!<! '!,<9! ;<,!!! $ &',# ! $;;, 9! May $;;, 9! 9$,' ! 7&&,<!! $''9, <! '!,9!! '!,<9! '7#,!!! $ ;<,# ! $$',99! June $$',99! $;,7&! 79$, <! $'<',!<! & ,&<! '!,<9! ! $ '<,'&! $';#,!9!

2eginning cash balance (ash receipts (ash collections from credit sales Total cash available (ash disbursements >urchases 5ages, ta%es, and e%penses +nterest D)uipment purchases Total cash disbursements Dnding cash balance

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.LO"/ +tem (ash 1ccounts receivable +nventories >roperty, plant, and e)uipment 1ccounts payable 1ccrued e%penses =ong-term debt (ommon stock 1ccumulated retained earnings Source/Use Use Use Use Use "ource Use "ource "ource "ource Amount :$99! :$7,<<! :$ ,$7& :$'!,'9! $ ,' < :$&<9 $ ,<!! $<,!!! $', #!

Intermediate 1!- .LO!/ a/ +f you borrow $#!,!!!,!!! for one month, you will pay interest of: +nterest 6 $#!,!!!,!!! % !.!!#7 +nterest 6 $ &#,!!! .owever, with the compensating balancer you will only get the use of: 1mount received 6 $#!* - $#!* % .!# 1mount actually receive 6 $<;,#!!,!!! This means the periodic rate actually is: >eriodic rate 6 $ &#,!!!/$<;,#!!,!!! >eriodic rate 6 !.!!##;9$<; or !.##;9$<;L "o, the D1K is: D1K6 B' 8 B &#,!!! / <;,#!!,!!!CP' : 'C D1K 6 !.!&$!<! 9 or &.$!<! 9L b/ To end up with $'#,!!!,!!!, you must borrow: 1mount to borrow 6 $'#,!!!,!!! / B'-.!#C 6 $'#,;9$,<;7.&9 The total interest you will pay on the loan is: Total interest paid 6 $'#,;9$,<;7.&9 B'.!!#7CP& - $'#,;9$,<;7,&$ 6 6#42724#-!# 1"- .LO!/ aC The D1K of the revolving credit arrangement is:

D1K 6 '.!'$< - ' 6 .!;9'$7#&& or ;.9 L bC To calculate the D1K of the loan, we can divide the interest on the loan by the amount of the loan. The interest on the loan includes the opportunity cost of the compensating balance. The opportunity cost is the amount of the compensating balance times the potential interest rate you could have earned. The compensating balance is only on the unused portion of the credit line, so:

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Epportunity (ost 6 !.!<B$;!,!!!,!!! - $<#,!!!,!!!CB'.!'$C< - .!<B$;!,!!!,!!! - $<#,!!!,!!!C Epportunity (ost 6 $;9,'$7.#; 1nd the interest you will pay to the bank on the loan is: +nterest (ost 6 $<#,!!!,!!!B'.!'!#C< - $<#,!!!,!!! +nterest (ost 6 $',$'$,$;&.< "o, the D1K of the loan in the amount of $<# million is: D1K 6 B$',$'$,$;&.< 8 $;9,'$7.#;C / $<#,!!!,!!! D1K 6 !.!<<< or <.<<L cC The compensating balance is only applied to the unused portion of the credit line, so the D1K of ta loan on the full credit line is: D1K 6 '.!'!#< -' D1K 6 !.!< &; or <. &;L 1#- .LO!/ a. 1 <#-day collection period means sales collections each )uarter are: (ollections 6 '/ current sales 8 '/ old sales 1 7&-day payables period means payables each )uarter are: >ayables 6 7/# current orders 8 /# old orders "o, the cash inflows and disbursements each )uarter are: %& $&9.!! '&!.!! '<9.!! $9!.!! $;&.!# <!.!! ' .!! $' 9.!# $'<9.!! ' 9.!# $'$.$# %' $9!.!! ';#.!! '&;.#! 9;.#! 9 .9! <7.;# ;#.!! ' .!! '7.## '&;.#! '7.## B<&.!#C %( 9;.#! '$!.!! '9 .#! $#.!! $ . # <;.#! ' .!! '#'.;# '9 .#! '#'.;# 7!.;# %) $#.!! '#.!! ! .#! '!;.#! 9<.&! #7.;# ' .!! '#!.7# ! .#! '#!.7# # .'#

2eginning receivables "ales (ollection of accounts Dnding receivables >ayment of accounts 5ages, ta%es, and e%penses (apital e%penditures +nterest Q dividends Total cash disbursements Total cash collections Total cash disbursements 3et cash inflow

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The companyAs cash budget will be: (ottonwood +3(. (ash 2udget Bin millionsC Q1 $<$.!! '$.$# $&9.$# :7!.!! $79.$# Q2 &9.$# -<&.!# .$! :7!.!! B;.'!C Q3 .$! 7!.;# #7.&# :7!.!! 7.&# Q4 #7.&# # .'# '!#.9! :7!.!! ;#.9!

2eginning cash balance 3et cash inflow Dnding cash balance *inimum cash balance (umulative surplus BdeficitC

5ith a $7! million minimum cash balance, the short-term financial plan will be: (ottonwood +3(. "hort-Term @inancial >lan Bin millionsC b. 2eginning cash balance 3et cash inflow 3ew short-term investments +ncome on short-term investments "hort-term investments sold 3ew short-term borrowing +nterest on short-term borrowing "hort-term borrowing repaid Dnding cash balance *inimum cash balance (umulative surplus BdeficitC 2eginning short-term investments Dnding short-term investments 2eginning short-term debt Dnding short-term debt Q1 $7!.!! '$.$# - !.77 !.79 ! ! ! ! $7!.!! :7!.!! $! '$.!! <!.77 $! $! Q2 $7!.!! -<&.!# ! !.9' <#. < ! ! ! $7!.!! :7!.!! $! <!.77 <'.$' $! $! Q3 $7!.!! 7!.;# -7!.9# !.'! ! ! ! ! $7!.!! :7!.!! $! <'.$' #.$< $! $! Q4 $7!.!! # .'# :# .&& !.#' ! ! ! ! $7!.!! :7!.!! $! #.$< ;9.!$ $! $!

2elow you will find the interest paid Bor receivedC for each )uarter: N': e%cess funds at start of )uarter of $'$ invested for ' )uarter earns .! B$'$C 6 $!.79 income N : e%cess funds of $79.$# invested for ' )uarter earns .! B$79.$#C 6 $!.9' in income N7: e%cess funds of $<.$' invested for ' )uarter earns .! B$<.$'C 6 $!.'! in income N<: e%cess funds of $ #.$< invested for ' )uarter earns .! B$ #.$<C 6 $!.# in income 3et cash cost 6 $!.79 8 !.9' 8 !.' 8 !.# 6 $'.9'

10- .LO!/ a. 5ith a minimum cash balance of $<! million, the short-term financial plan will be:

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(ottonwood +3(. "hort-Term @inancial >lan Bin millionsC Q1 $<!.!! '$.$# : !.'7 !.'9 ! ! ! ! $<!.!! :<!.!! $! $$.!! $.'7 $! $! Q2 $<!.!! -<&.!# ! !.#9 $.'7 '&.7< ! ! $<!.!! :<!.!! $! $.'7 $! $! '&.7< Q3 $<!.!! 7!.;# -'7.$ ! ! ! -.<$ -'&.7< $<!.!! :<!.!! $! $! $'7.$ '&.7< $! Q4 $<!.!! # .'# -# .<7 !. 9 ! ! ! ! $<!.!! :<!.!! $! '7.$ &&.7# $! $!

2eginning cash balance 3et cash inflow 3ew short-term investments +ncome on short-term investments "hort-term investments sold 3ew short-term borrowing +nterest on short-term borrowing "hort-term borrowing repaid Dnding cash balance *inimum cash balance (umulative surplus BdeficitC 2eginning short-term investments Dnding short-term investments 2eginning short-term debt Dnding short-term debt

2elow you will find the interest paid Bor receivedC for each )uarter: N': e%cess funds at start of )uarter of $$ invested for ' )uarter earns .! B$$C 6 $!.'9 income N : e%cess funds of $ $.'7 invested for ' )uarter earns .! B$ $.'7C 6 $!.#9 in income N7: shortage of funds of $'&.7< borrowed for ' )uarter costs .!7B$'&.7<C 6 $!.<$ in interest N<: e%cess funds of $'7.$ invested for ' )uarter earns .! B$'7.$ C 6 $!. 9 in income 3et cash cost 6 $!.'9 8 !.#9 : !.<$ 8 !. 9 6 $!.##

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b.

1nd with a minimum cash balance of $'! million, the short-term financial plan will be: (ottonwood +3(. "hort-Term @inancial >lan Bin millionsC Q1 $'!.!! '$.$# - !.;7 .;9 ! ! ! ! $'!.!! :'!.!! ! 7$.!! #$.;7 ! ! Q2 $'!.!! -<&.!# ! '.'$ <;. < ! ! ! $'!.!! :'!.!! ! #$.;7 ' .<$ ! ! Q3 $'!.!! 7!.;# -7'.!! !. # ! ! ! ! $'!.!! :'!.!! ! ' .<$ <7.7$ ! ! Q4 $'!.!! # .'# #7.! !.9; ! ! ! ! $'!.!! :'!.!! ! <7.<$ '!$.&& ! !

2eginning cash balance 3et cash inflow 3ew short-term investments +ncome on short-term investments "hort-term investments sold 3ew short-term borrowing +nterest on short-term borrowing "hort-term borrowing repaid Dnding cash balance *inimum cash balance (umulative surplus BdeficitC 2eginning short-term investments Dnding short-term investments 2eginning short-term debt Dnding short-term debt

2elow you will find the interest paid Bor receivedC for each )uarter: N': e%cess funds at start of )uarter of $7$ invested for ' )uarter earns .! B$7$C 6 $!.;9 income N : e%cess funds of $#$.;7 invested for ' )uarter earns .! B$#$.;7C 6 $'.'$ in income N7: e%cess funds of $' .<$ invested for ' )uarter earns .! B$' .<$C 6 $!. # in interest N<: e%cess funds of $<7.<$ invested for ' )uarter earns .! B$<7.<$C 6 $!.9; in income 3et cash cost 6 $.;9 8 '.'$ 8 !. # 8 .9; 6 $7.!$ "ince cash has an opportunity cost, the firm can boost its profit if it keeps its minimum cash balance low and invests the cash instead. .owever, the tradeoff is that in the event of unforeseen circumstances, the firm may not be able to meet its short-run obligations if enough cash is not available.

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Challenge 11- .LO#/ a. @or every dollar borrowed, you pay interest of: +nterest 6 $'B.! 'C 6 $!.! ' Rou also must maintain a compensating balance of < percent of the funds borrowed, so for each dollar borrowed, you will only receive: 1mount received 6 $'B' : .!<C 6 $!.$& 5e can ad0ust the D1K e)uation we have been using to account for the compensating balance by dividing the D1K by one minus the compensating balance, so: D1K 6 HB'.! 'C< : 'I/B' : .!<C D1K 6 .!$!7 or $.!7L 1nother way to calculate the D1K is using the @S+@ Bor >S+@C. @or each dollar borrowed, we must repay: 1mount owed 6 $'B'.! 'C< 1mount owed 6 $'.!9&; 1t the end of the year the compensating will be returned, so your net cash flow at the end of the year will be: Dnd of year cash flow 6 $'.!9&; : .!< Dnd of year cash flow 6 $'.!<&; The present value of the end of year cash flow is the amount you receive at the beginning of the year, so the D1K is: @S 6 >SB' 8 KC $'.!<&; 6 $!.$&B' 8 KC K 6 $'.!<&;/$!.$& : ' D1K 6 .!$!7 or $.!7L b. The D1K is the amount of interest paid on the loan divided by the amount received when the loan is originated. The amount of interest you will pay on the loan is the amount of the loan times the effective annual interest rate, so: +nterest 6 $'7!,!!!,!!!HB'.! 'C< : 'I +nterest 6 $'', &9,9 ' @or whatever loan amount you take, you will only receive $& percent of that amount since you must maintain a < percent compensating balance on the portion of the credit line used. The credit line also has a fee of .'#! percent, so you will only get to use: 1mount received 6 .$&B$'7!,!!!,!!!C : .!!'# B$<!!,!!!,!!!C 1mount received 6 $' <, !!,!!! "o, the D1K of the loan is: D1K 6 $'', &9,9 '/$' <, !!,!!!

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D1K 6 .!$!; or $.!;L

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