4.

If Dell repurchases $500 million of common stock in 1997 and paid its long
term debt of $113 million, along with maintaining 50% growth.

Overall cash requirement will be increased by:

$500 million + $113 million + $778.51 million = $1,391.51 million
It will be met partly by short term investment by $591 million.
By improving profit margin from 5.41% to 6.6%, the increased contribution
will be $524.3 million.
The remaining cash flow to be met will be $1,391.51 million - $591
million - $524.3 million = $276.21 million.

By improving the cash convention cycle, cash inflow will improve and meets
needs:
DSI = 31 days, reducing it by 3 days will save carrying costs by
3*1.5*(4,229/365) = $52.15 million.
DSO = 43 days, reducing it by 6 days will reduce receivable by 6*
1.5*(5,296/365) = $130.6 million.
DPO = 33 days, increasing it by 6 days will improve payable by
6*1.5*(4,229/365) = $104.2 million.
The increased cash inflow out of operational improvements will be:
$52.15 million + 4130.6 million + $104.2 million = $286.95 million.
Because Dell already faced problem with component shortages in 1996, it

will not look into reducing its DSI by a large margin.

Conclusion: Because $286.95 million (obtained through operational process
improvements) along with $591 million (short term investments) and $524.3
million (short term investments)= $1,402.25 million above the required cash
flow of $1,391.51 million, Dell will be able to fund its growth of 50% in 1997 after
paying long-term debt of $113 million and buying back equities of $500 million.