Math Problem Solver

Ahmad is a Credit Officer at the Makasar Branch. He has just returned to the office from his daily visits, and he is happy that all his clients are making their repayments timely. Additionally, he has gathered all the support information to assess the credit of Mr. Elyas, a potential client referred by one of his best clients. Mr. Elyas is very urgent to get a loan because he would like to diversify his shop buying new products and at good price. Moreover, he needs to buy a new copy/printer machine for the shop as the old one is already having some problems. Mr. Elyas has only borrowed once in his life from his brother to pay the renovation of the kitchen in his house. Ahmad prepares the new client's case to present to the Credit Committee the following day.Mr. Elyas has been married to Mrs. Indra for 19 years. She mainly takes care of the household, but also prepares some pastries to be sold in her husband’ shop in the afternoons. They have three children, the eldest one moved to the capital city two years ago to work and study. The other two younger children still go to the public school. The business of Mr. Elyas and his wife, a small grocery shop, has been in the same area for more than 15 years and the neighbors have seen how it has grown and diversified. For instance, in the last year, they began offering internet services, photocopies and impressions highly demanded as there are schools, institutes and offices located near to the shop. Ahmad realized that Mr. Elyas keeps a good record of his sales, purchase of supplies, account receivables and payables. Mr. Elyas manages the finances of the business very well, but his wife takes care of the family’s finances.Ahmad has explained the conditions of the credit products of the MFI that he works for:The MFI charges an interest rate of 2.5% per month, which is calculated according to the declining balance method.Borrowers have to pay monthly installments. Grace periods are not allowed. In any month, not more than 55% of the net cash-flow shall be used for loan repayment and loans should be paid back as quickly as possible.The cash-flow surplus of the previous month shall not be added as cash-inflow for the following month. The client’s Debt-to-Equity ratio after loan disbursement should not exceed 50%. Ahmad obtained all the information from the client’s business, his family’s expenses and assets during the personal visit. Additionally, he asked some neighbors for references of the family. All of them agree that Mr. Elyas and his wife are responsible, hard-working people and entrepreneurs who always look for a way to progress. Ahmad has gathered and verified the following information to support the credit evaluation: The business generates a monthly revenue of $1,150 per month, except during school holidays when sales are low: in June, July and August sales drop to $1,000 per month. These revenues are always collected in cash.Thanks to her work in the capital, the eldest daughter covers her expenses and Mr. Elyas only sends her $50 per month to support her financially.Mrs. Indra prepares some pastries for special events receiving an approximately net income of $ 50 per month. In June when there is the time of school graduations, she earns $ 90. For Mother’s Day in May, the eldest daughter gives her mother $30 and for Father’s day in June, she also gives her dad $30.The business employs a part-time worker who costs $120 per month.At the beginning of each quarter, a technician comes to the shop to give maintenance to all the equipment from the shop (computers, printer, photocopier). Mr. Elyas pays him $60 for each visit. One of the biggest expenses is the rent of the house in where they live, and where the store is located. They pay $280 per month.The rest of the expenses of the family do not exceed $350 per month. Besides, food, utilities costs, educational and health expenses, they also include the monthly payments for lunch at the school for the youngest children, and fees for the sport center where their children attend twice a week. Other exceptional expenses occur in January, April and November where they celebrate their children's birthdays and spend $60 per celebration, and in December when they spend $130 during the Christmas season. Every two weeks, a supplier visits them and brings stock for the shop and every time, they pay $90, but during the school holidays they only pay $70.The stock has an estimated value of $2,800. This stock is considered a permanent value.Mrs. Indra keeps the money from the sale of pastries for special events and from her daughter in a small box in case they have a health emergency or some other urgent need. Until December they had saved $550, but in January she gave her father-in-law $100 for some medical examinations and in the same month she lent a friend $50 to pay back her debts from the Christmas season which will be repaid in March. In another box, she keeps the business surpluses that are regularly used to invest in the business. At the date of Ahmad’s visit, they sum up $ 500, maximum a half of these savings can be invested in the new merchandise and copy/printer machine since the other half is going to be saved for a future business expansion Mr Elyas has in mind.The business and household assets including a small truck are valued at $5,000. They buy all the merchandise in cash, so they do not have accounts payable. However, there are some accounts receivables from reliable clients who are dedicated to agriculture and pay for their products as soon as the harvest season arrives. These accounts add up to $1500 which will be collected in three equal installments: in May, June and July. The proposed loan amount is $850. The new copy/printer machine costs $500 and will be paid as soon as Mr. Elyas receives a loan. The new merchandise has a price of $600, but there is a discount of 10% if it is paid in cash and before February 3er. If the disbursement of the loan takes place on February 1st, Mr. Elyas and his wife could already pay the first installment at the end of the month. Based on the above information, Ahmad prepares the proposal for his committee. Among different information, he needs to present the following points:What is the equity value of the entire household economy on January 31st, before the loan is disbursed? (max. 2 points) What is the client’s Debt-to-Equity Ratio on February 3er, after the disbursement of the loan and considering the client's own contribution for the merchandise and the copy machine? (max. 2 points) How should the loan officer structure the loan repayment schedule, in accordance with the above-mentioned loan conditions and with the client's request to repay the loan as soon as possible? – Fill in all figures in the cash-flow table available in the excel file included in this task. (max. 25 points)