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Transcription of this question: 4.Grunsburg Textiles (GT)Grunsburg Textiles (GT) is a textile company founded by the paternalistic leader Henrik Steiner.As the company grew, it became very committed to corporate social responsibility (CSR). “Ouraims,” GT says on its website, “include making profits, providing safe and secure employment,contributing to society through investment in environmentally friendly production practices andsupporting ethical causes”. Many people believe that GT’s success is tied to its reputation fortaking care of its employees and for its commitment to CSRIn 2015, GT purchased €44 million in new environmentally friendly equipment It financed thepurchase with a bank loan. GT originally forecasted that the new equipment would generate€8 million in annual net cash flow. Instead, the actual increase in GTs annual net cash flowfrom the new equipment was only €6 million. The Chief Financial Officer (CFO), Elaine, warnedHenrik that unless net cash flow increased significantly, the average rate of return (ARR) would besignificantly lower than originally forecasted.GT is struggling to make the loan payments and to have sufficient working capital. Elainedetermined that one way to shorten the •working capital cycle is debt factoring. However, when sheapproached several (debt) factors, she was discouraged by their proposed discount rates.Elaine knows that the situation is worse than she had wamed. If the economy were to weakenand revenue to decline, she believes that the company could go out of business. Proposals for asolution include cutting back on GTs commitment to its employees and CSR practices.(a)(b)(c)(d)State any two stages of the working capital cycle.Calculate for GT:[2]0)(ii)the payback period for the €44 million investment in new equipment based on theforecasted increase in net cash flow (show all your working).[2]the average rate of return (ARR) based on an annual increase in net cash flow of€6000 and assuming an asset life of the new equipment of eight years (show allyour working).With reference to GT, explain one advantage and one disadvantage of debt factoring.Examine Elaine’s proposals to cut back on G Ts commitment to its employees andCSR practices.[2][10]

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