(A)

Inventory Days-1995 Compaq Dell Difference Days 73 32 41 From Case From Case

(B)

Liquidity Impact Days Difference Total Days Ratio Dell COGS-1995 Unneeded Investment 41 365 0.11233 $ 2,737 $ $ 307 652 47% From Case From Case

(C)

Dell 1995 S/E Percent of S/H Investment

(A)

Inventory Days-1995 Compaq Dell Difference Days 73 32 41

(B)

Inventory as a Percent of COGS Dell Total Days Ratio Value Loss (Given) Dell 32 365 8.8% 30% -2.6% Compaq 73 365 20.0%

(This is the reduction in value of inventory due to obsolescence and downward price realization.)

Compaq

-6.0%

(C)

Margin Advantage Dell COGS 1995 Dell Loss Advantage Potential Margin Adv. $ 2,737 3.4% $ 92

Calculating Required Investment to Support 1996 Growth 1995 3,475 149 % of Revenue 100.0% 4.3% 1996 Est. 5,296 From Case 228 Pro Forma at Same Margin

Revenue Net Profit

Short-term Investments All Other Assets Total Assets

484 1,110 1,594

13.9% 31.9% 45.9%

484 Leave Unchanged 1,689 Vary with Sales at equivalent % 2,173

Total Asset Increase/Need Less Profit Net Financing Requirement

579 (228) 351

Key Assumptions:

Short-Term Investments not linked to sales growth Liabilities are fixed (financing requirement lower if they also rise with Sales)

Calculating Required Investment to Support 1997 Growth 1996 Actual 5,296 272 % of Revenue 100.0% 5.1% 1997 Estim. 7,944 Assume growth @ 50% 405 Pro Forma at Same Margin

Revenue Net Profit

Short-term Investments All Other Assets Total Assets

591 1,557 2,148

11.2% 29.4% 40.6%

591 Leave Unchanged 2,336 Vary with Sales at equivalent % 2,927

Total Asset Increase/Need Less Profit Net Financing Requirement

779 (405) 374

Key Assumptions:

Short-Term Investments not linked to sales growth Liabilities are fixed (financing requirement lower if they also rise with Sales)

Options to Support 1997 Financing Need

Total 1997 Pro Forma Funding Need Less Pro Forma Profit Funding Still to be Financed 779 (405) 374

Levers 1996 Memo: Sales Memo: COGS A/R DSO Inventory Days A/P DPO Gross Margin GM% 5,296 4,229 726 50.0 429 37.0 466 40.2 1,067 20.1% 1997 (e) 7,944 6,344 1,089 50.0 644 37.0 699 40.2 1,601 20.1% 1,198 5 55.0 644 0 37.0 960 15 55.2 1,918 4.0% 24.1% 222 Adj. for taxes @ 30% 261 0 (109) Proposed Change New 1997 Metric 1997 Adj. Cash Impact

TOTAL

374