Your job is to evaluate the loan application being made by Mark Cartwright and the Cartwright Lumber company. Please read through the case and answer the following question prompts.

Using the provided Balance Sheet and Income Statement for Cartwright Lumber, please create a simple Cash Flow statement for the years $2002,2003,$ and Q$1$ of $2004,$ separating out the items into Cashflow from Operations, Cashflow from Investing, and Cashflow from Financing.

Why has Cartwright Lumber$$s borrowing increased despite consistent profitability?

Calculate the Return on Equity and the Return on Invested Capital for each year. What can you say about these two numbers relative to the interest rate on the proposed loan? If Cartwright takes on the loan and continues to grow, what will happen to these numbers?

What is the annualized cost of not taking the $2\%$ discount assuming Cartwright currently extends its payables by around $40$ days? What is it assuming it extends payables $55$ days? Qualitatively, what does this mean about the implied cost of working trade credit?

Will this loan be sufficient to cover Mr$.$ Cartwright$$s working capital needs, and continue the growth in the company?