You have been approached by Company Electronic Mfg Corp. (EMC), an electronics manufacturer. Time has passed since your Mid-Term examination and they want to come back and request financing support. Youre working for EDC, an Export Credit Agency, and youve been asked to analyze their statements and determine whether youll provide support. Please explain the reasoning for your decision. Refer to Appendix A for financial details.

Opportunity: EMC has won a sales contract with a French distributor in France. They expect to have $20M in sales annually from this distributor, but will be required to set-up a warehouse in France and hold inventory there. The warehouse will cost $2M per year, and they must hold $3M in inventory in order to service French clients. They want a $15M term loan over 3-years to support the expansion.

Appendix A Financial Statements of EMC Income Statement for 2012 Fiscal Year End (December 31, 2012) Revenue: $150M COGS: $95M Gross Profit: $55M Selling, General, Admin Expenses: $35M (includes $1.5M interest expense) Depreciation: $5M Taxes: $5M Net Income: $10M Balance Sheet for 2012 Fiscal Year End (December 31, 2012) Assets: Cash: $1M A/R: $12M Inventory: $30M Total Current Assets: $43M Plants, Warehouses: $8M Equipment: $10M Goodwill: $50M Total Fixed Assets: $68M Total Assets: $111M Liabilities: Short-Term Debt: $12M A/P: $15M Other Short Term Liabilities: $5M Total Current Liabilities: $32M Long-Term Debt: $45M Other Long Term Liabilities: $3M Total Long Term Liabilities: $48M Total Liabilities: $80M Equity: $31M Cash Flows for 2012 CFO: $9M CFI: - $12M Capex: $-10M (they spent $10M on CAPEX) CFF: $12M Ratios: Current Ratio: 1.34 Quick Ratio: 0.40 Debt/TNW: ________ (you should calculate this if you need it for your analysis) Debt/Equity: 2.58 ROE: 32% CFO / Interest Expense: 6X Current Debt Instruments: Operating Line: $15M maximum based on 75% of A/R and 30% of inventory. $12M is drawn Term Loan: $45M (fully drawn)