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Subject:  Excess Cash/Enterprising Interest Date:  11/22/2008  2:07 PM
Author:  FizzDot Number:  1596 of 1817

Hi Hewitt,

Thanks for your message - I hope the stock market experience is not too awful for you at the moment. I totally understand your priorities, and really appreciate your help, especially when you have such worries and concerns.

My only questions at the moment are about excess cash and enterprising interest. I am trying to use the new method you wrote about in earlier messages on this board (I have now read most of the stuff on here, very valuable to me). In your QSII post:

Excess Cash calculation: costs = COGS + SG&A + R&D + TAX + Investment in fixed and working capital.

1) R&D is the actual money spent that year, not the adjusted one we get by depreciating it, correct?

2) You gave formulas in several posts, some of them include tax in the costs and some don't.
a) Do I include tax in costs?
b) Which tax number? Defensive, enterprising or the number directly from the income statement?

3) Once you have the costs, I calculate excess cash as
(cash and equivalents from balance sheet) - costs/4. Or should I be using total revenues: (total revenues) - costs/4?

I end up with a negative number for excess cash - how do you handle this situation? I've thought to:

a) Set excess cash to zero.
b) Subtract it? This would increase Gross Enterprising Capital, because it's a negative number?
c) Something else?

If you have time to help me out, I'd really appreciate it.

Best wishes to you and your family during this hard time.

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