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Both Drs. Bajaj and Spiro project inventory expenditures to
remain constant at 50 percent of sales revenue. However,
Dr. Bajaj projects “other working capital” (including cash) at
5 percent of sales whereas Dr. Spiro projects noninventory
working capital at 3.5 percent of sales (in both cases, based on
historical data). Dr. Spiro justifies his lower figure by
discounting the 1993 and 1994 average working capital level
(11.7 percent) on the ground that it was largely attributable to
“excess cash”. As we discuss, infra (in connection with our
analysis of Korbel’s nonoperating assets), we do not believe
Korbel retained excess cash in 1993 and 1994. We are persuaded
that Dr. Bajaj’s projection of working capital levels is
justified based on historical performance, and we find in
accordance with his calculation.
Dr. Spiro projected annual capital expenditures by Korbel
equal to $4 million for 1995 and every year thereafter.
Dr. Bajaj projected annual capital expenditures on the assumption
that they would equal depreciation plus 30 percent of Korbel’s
annual sales increases. Dr. Bajaj projected that capital
expenditures would increase in an amount adequate to maintain
Korbel’s net fixed asset to sales ratio at 30 percent, which is
slightly below the average of such ratios for the 1990-1994
period. Each expert points to unreasonable aspects of the
other’s approach: Dr. Bajaj to the fact that Dr. Spiro’s
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