$3)$ Do you agree with Mr$.$ Cartwright$$s conclusion that a $$465,000$ line of credit would more than meet his foreseeable funding needs? How much will he need to borrow in order to finance his expected sales over the next few years?

a$.$ Assume that Sales reach $$3\mathrm{.}6$M in $2004$ and then increase at the rate of $25\%$ per year until $2007.$

We will need to estimate the size of the EFN $($bank loan$)$ for each year. To do this, we will proceed as follows:

$-$ Forecast assets;

$-$ Forecast non$-$bank liabilities, including Net Worth;

$-$ The difference gives you the EFN $($Bank debt plug$)$;

$-$ With this level of Bank debt, is interest expense what was assumed? If yes, stop. Otherwise, repeat until you converge.

Note: no more than $3$ repetitions will be necessary.

b$.$ Repeat the same procedures as above with one change: Cartwright Lumber will pay its accounts payable in $10$ days to take advantage of the purchase discount.