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Case Biglow Toy Company

The document presents three alternatives for a company to obtain financing: a 1.5% short-term loan, stretching payments to suppliers at 3%, or minimizing borrowing costs. It analyzes cash inflows and outflows from September to March for each option, showing that stretching payments results in the lowest net cost of 0.01% for borrowing.

Uploaded by

Meher Shiva
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261 views5 pages

Case Biglow Toy Company

The document presents three alternatives for a company to obtain financing: a 1.5% short-term loan, stretching payments to suppliers at 3%, or minimizing borrowing costs. It analyzes cash inflows and outflows from September to March for each option, showing that stretching payments results in the lowest net cost of 0.01% for borrowing.

Uploaded by

Meher Shiva
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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three alternatives

loan ST Loan 1.5%


strech payments strech 3%
MINIMIZE net cost of boorowing

1%
1.50%
3%
0.50%

max of 75 % of the receivables can be pledged

INFLOWS

outflow

ST loan
pledge
strech income

investment

invest 1.005
pledge
strech

cash deficit
1.015 pledge
1.031 strech
invest
0.01 ST loan

1.005 invest

1.01 ST loan
1.015 pledge
1.031 strech

September

Oct to feb

march

n be pledged

ST Loan 1.5%
Pledge
strech 3%
investment

Sep
oct
nov
dec
713.7524
0
0
0
0
0
0
913.7524 611.1836 7.10124

A/C recivables
planned payment
Cash Surplus
Cash Deficit
cash surplus/(deficit)
Net cost of borrowing
lower limit - loan
ST Loan
upper limit - loan

700
800
200
200

jan

feb

mar

0
0
0

0
0
0

0
0
0

1000
400
300

500
500
1500

500
900

700
1000

1200
600

300
-300

600
-600

900
-900

300

1500

50.48533
400
>=
713.7524
<=
1000

Pledge

0
<=

upper limit - pledge

<=
525

strech

0
<=

upper limit - strech

<=
525

0
<=
1000

<=
800

Sep

<=
375

900

<=
900
0

<=

<=
750
0

<=
600

375
0
<=

400

500

oct
nov
dec
jan
feb
mar
0
3.8E-05 0.000754 -900.001 292.8625 1492.862

net cash flow


>=

Decision variable

x1
1

x2
0

x3
0

x4
0

x5
0

x6
0

availability

number of nodes

variables

x1
1
1
0
1
1
0
0
0

x2
1
1
1
0
1
1
0
0

x3
0
1
1
0
0
1
1
0

x4
1
0
0
1
1
0
0
0

x5
1
1
0
1
1
1
0
0

x6
0
1
1
0
1
1
1
1

1
1
1
1
1
1
1
1

>=
>=
>=
>=
>=
>=
>=
>=

1
1
1
1
1
1
1
1

x7
1

x8
0

x7
0
0
1
0
0
1
1
1

x8
0
0
0
0
0
1
1
1

X1+x2+x4+x5
x2+x1+x3+x5+x6
x3+x2+x6+x7
x4+x1+x5
x5+x1+x2+x4+x6
x6+x2+x3+x5+x7+x8
x7+x3+x6+x8
x8+x6+x7

>=
>=
>=
>=
>=
>=
>=
>=

1
1
1
1
1
1
1
1

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