Original work only!
iscussion—ShortTerm Financing Needs
 After reading your report, as well as comments by others on the team, the Genesis Energy team began to understand the importance of cash flow and financing in highgrowth scenarios. The Genesis Energy accountant suggested that the focus should be on developing a financial strategy that would ensure operational needs are met through shortterm financing. The Genesis Energy team instructed Sensible Essentials to explain in basic terms the factors and mechanics necessary to determine shortterm financing needs.
As the finance expert for Sensible Essentials, do the following:
 Explain the concept of working capital and its importance to Genesis Energy.
 Describe the mechanism and methodology used to ensure that operational needs are met through shortterm financing. Explain why this methodology is important to Genesis Energy.
 Explain how working capital represents the assets that are needed to carry out the daytoday operation and how working capital can act as a source of financing or increase the need for financing.
In your response, be sure to consider the time value of money and the relative advantages and disadvantages of shortterm loans versus internally generated funds.
Write your initial response in 300–500 words Your response should be thorough and address all components of the discussion question in detail, include citations of all sources, where needed, according to the APA Style, and demonstrate accurate spelling, grammar, and punctuation
 Please complete the mini case found on pages 171–172 of your textbook, Brigham and Ehrhardt.
Mini Case
Assume that you are nearing graduation and have applied for a job with a local bank. As part of the bank’s evaluation process, you have been asked to take an examination that covers several financial analysis techniques. The first section of the test addresses discounted cash flow analysis. See how you would do by answering the following questions.
a. Draw time lines for (1) a $100 lump sum cash flow at the end of Year 2, (2) an ordinary annuity of $100 per year for 3 years, and (3) an uneven cash flow stream of –$50, $100, $75, and $50 at the end of Years 0 through 3.
b.
1. What’s the future value of an initial $100 after 3 years if it is invested in an account paying 10% annual interest?
2. What’s the present value of $100 to be received in 3 years if the appropriate interest rate is 10%?
c. We sometimes need to find out how long it will take a sum of money (or anything else) to grow to some specified amount. For example, if a company’s sales are growing at a rate of 20% per year, how long will it take sales to double?
d. If you want an investment to double in 3 years, what interest rate must it earn?
e. What’s the difference between an ordinary annuity and an annuity due? What type of annuity is shown below? How would you change the time line to show the other type of annuity?
f.

 1. What’s the future value of a 3year ordinary annuity of $100 if the appropriate interest rate is 10%?
 2. What’s the present value of the annuity?
 3. What would the future and present values be if the annuity were an annuity due?
171 172
 g. What is the present value of the following uneven cash flow stream? The appropriate interest rate is 10%, compounded annually.
Subject 
Business 
Due By (Pacific Time) 
01/23/2015 05:00 pm 
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