Hampton Machine Tool Company, a machine tool manufacturer, was founded in 1915. Hampton's customer base consists primarily of military aircraft manufacturers and automobile manufacturers in the Saint area -Louis. Hampton boomed in the 1960s with record profits in the mid to late 1960s. Hampton slowed down in the 1970s with the withdrawal from the Vietnam War and the oil embargo. Hampton stabilized in the late 1970s and now has a larger market share as other competitors have been unable to weather the tough times. Today is September 14, 1979. Hampton has requested an extension until the end of December 1979 on the million dollar loan he had provided. taken out from the St. Louis National Bank in late December 1978. The loan was originally taken out on terms of paying monthly interest at the rate of 1.5% and the principle was to be repaid by the end of September 1979. Hampton also requested a additional loan of $350,000 which would also be repaid at the end of December 1979 with monthly interest at the rate of 1.5%. The additional loan is necessary to allow Hampton to update its machines, something they have not done since the economy entered a recession. The problem Hampton Machine Tool Company currently faces is the ability to repay its current loan and the additional loan requested from St. Louis National Bank. If Hampton continues as planned, it will be short $331,500. (Exhibit 1) Ways to solve the current problem are to not pay dividends; this will save $150,000, but they will still be short $181,500. Paying dividends would be a nice gesture for the shareholders who supported them, but it could come at too high a cost. Shareholders don't want to see shares ultimately lose value. They missed...... middle of paper ......alCash in hand from the past 1,559,000 699,000 1,008,247 768,809 1,559,000Collections from consumers 684,000 1,323,000 779,000 1,604,000 4 390,000 Interest on cash 0.247 1,812 1,274 Total Cash available 2,243,000 2,023,247 1,789,059 2,374,083 5,949,000 Interest on 1st loan 15,000 15,000 15,000 15 000 60,000 Principle first loan 1,000,000 1,000,000 Principle second loan 350,000 350,000Interest on the 2nd loan 5,250 5,250 10,500Payment of dividends 150,000 150,000Payment of taxes for September 15 181,000 181,000Payment of taxes for December 15 181,000 181,000All other expenses 400,000 400,000 400,000 400 000 1,600,000Pay August AP 948,000 948,000Pay for inventory 600,000 600,000 600,000 1,800,000Total expenses 1,544,000 1,015,000 1,020,250 2,701,250 6 280.50 0Ending cash balance 699,000 1,008,247 768,809 -327,167 -331,500