Question 1 VV The company's performance is rapidly declining; the CEO is looking for new ways to boost the company's performance. Simultaneously, the CEO needs understand the percentage of debt available under the company's borrowing arrangement in order to determine the amount of cash available to establish new lines of business. Based to the loan terms, the borrowing base percentage for accounts receivable is 50%, 40% for inventory, and 60% for fixed assets. The following is the company's financial information: Amount ($) 600,000 300,000 100,000 200,000 Account Account receivable Raw material inventory Work in process inventory Finish goods inventory Fixed Assets: Purchase price Installation costs Cost of trail runs Depreciation expenses Repair and maintenance Loans 500,000 20,000 10,000 20,000 40,000 500,000 Required: (a) Calculate the percentage of debt available under the company's borrowing arrangement to determine the amount of funding available for new lines of business. (13 marks) (b) To finance the new business line, the company may also choose to issue additional shares rather than relying heavily on debt financing. You are required to weigh the advantages and disadvantages of option 1 (debt financing) and option 2 (equity financing) and provide a recommendation to the company. (12 marks) [Total: 25 Marks]