Paymore Products places orders for goods equal to 75% of its sales forecast in the next...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter which has been provided in the table below. Sales forecast Quarter in Coming Year First $492 Second $346 Third $355 Fourth $403 Following Year First Quarter $403 Paymore's labor and administrative expenses are $84 per quarter and interest on long-term debt is $59 per quarter. Suppose that Paymore's cash balance at the start of the first quarter is $40 and its minimum acceptable cash balance is $30. On average, one-third of sales are collected in the quarter that they are sold, and two-thirds are collected in the following quarter. Assume that sales in the last quarter of the previous year were $355. Also, one third of the orders are paid for in the current month and then two thirds of the next quarter's orders are paid in advance. Work out the short-term financing requirements for the firm in the coming year using the above table. The firm pays no dividends. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Negative amounts should be indicated by a minus sign.) Answer is complete but not entirely correct. Quarter First Second Third Fourth Sources of cash Cash at start of period $ 40 $ 2 $ 38 $ (46) Net cash inflow (38) 36 (84) (74) Cash at end of period 2 38 (46) (120) Minimum operating cash balance 30 30 30 30 Cumulative financing required $ 28 $ 0 $ 76 $ 196 Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter which has been provided in the table below. Sales forecast Quarter in Coming Year First $492 Second $346 Third $355 Fourth $403 Following Year First Quarter $403 Paymore's labor and administrative expenses are $84 per quarter and interest on long-term debt is $59 per quarter. Suppose that Paymore's cash balance at the start of the first quarter is $40 and its minimum acceptable cash balance is $30. On average, one-third of sales are collected in the quarter that they are sold, and two-thirds are collected in the following quarter. Assume that sales in the last quarter of the previous year were $355. Also, one third of the orders are paid for in the current month and then two thirds of the next quarter's orders are paid in advance. Work out the short-term financing requirements for the firm in the coming year using the above table. The firm pays no dividends. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Negative amounts should be indicated by a minus sign.) Answer is complete but not entirely correct. Quarter First Second Third Fourth Sources of cash Cash at start of period $ 40 $ 2 $ 38 $ (46) Net cash inflow (38) 36 (84) (74) Cash at end of period 2 38 (46) (120) Minimum operating cash balance 30 30 30 30 Cumulative financing required $ 28 $ 0 $ 76 $ 196
Expert Answer:
Answer rating: 100% (QA)
To calculate the shortterm financing requirements for Paymore Products in the coming year we need to ... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0078034640
7th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
Posted Date:
Students also viewed these finance questions
-
1. Create the Free Body Diagram of the Car 2. Create the Equation of Motion to obtain the Car model 3. Develop into state space variables or Laplace transform to get the time constant 4. Based on...
-
In the final discussion post share one concept/idea/activity/tip that learned in this subject business communication that will take as an essential tool for future workplace. Examples. Writing an...
-
The income statement information for 2010 and 2011 of the Connor Company (a sole proprietorship) is as follows: Required Fill in the blanks labeled (a) through (g). All the necessary information is...
-
What are guaranteed payments and how do partnerships and partners treat them for income and self-employment tax purposes?
-
"The federal funds rate can never be above the discount rate." Is this statement true, false, or uncertain? Explain your answer.
-
Fugacity and pressure are numerically not equal for a gas (a) At low temperature and high pressure (b) At standard state (c) Both (a) and (b) (d) In an ideal state.
-
What was wrong with the previous focus on cost-benefit? Does the PM&C system still include a cost-benefit analysis? MINI CASE Heublein, Inc., develops, manufactures, and markets consumer food and...
-
During the year, Rosenberg Incorporated has the following inventory transactions. Date January 1 Transaction Beginning inventory March 4 Purchase June 9 Purchase November 11 Purchase Number of Unit...
-
In 20X2, the new CEO of Watsontown Electric Supply became concerned about the companys apparently deteriorating financial position. Wishing to make certain that the grim monthly reports he was...
-
Discuss the following statements. (a)Explain why cluster sampling is a probability sampling design. (b)What are the advantages and disadvantages of cluster sampling? (c)Describe a situation with the...
-
In early April 2022, Woolworths Group is trading at $47.04. Woolworth has announced that it will pay a dividend of $0. 196 per share in 76 days and you estimate that it will pay a dividend of $0.23...
-
Xiaomi Inc. is currently trading at $100 per share. After examining the stock of Xiaomi, you have determined that in one year time its price will either increase to $130 with probability 55% or...
-
ZeroLeverage Co. is a manufacturing company. It is expected to earn $500,000 EBIT next year, and the EBIT will grow at a constant rate of 2% forever. It always distributes all its net earnings as...
-
Getrich has 4.1 million shares outstanding and a current share price of $8.8 per share. It also has $56.6 million in outstanding debt, with a debt cost of capital of 6.2%. Getrich's equity cost of...
-
Stock D has a beta of 1.3, the risk free rate is 4%, and the market risk premium is 11%. What is the expected return for Stock D
-
24. A positive gamma portfolio tends to have a () left tail than the normal distribution. If the distribution of AP is normal, the calculated VaR tends to be( ). IV too low I heavier A. I, III II...
-
If |62x|>9, which of the following is a possible value of x? A. 2 B. 1 C. 0 D. 4 E. 7
-
"Jumping jackasses! Not another one!" groaned George Luger. It was a memo from the CEO of DVR Importers dated December 31, 2007. It was the third memo from the CEO that he had received that day. It...
-
What are the largest institutional investors in bonds? In shares?
-
Consolidated Jewels needs to raise $2 million to pay for its Diamonds in the Rough campaign. It will raise the funds by offering 200,000 rights, each of which entitles the owner to buy one new share....
-
For any pure substance, the difference between \(C_{P}\) and \(C_{V}\) can be expressed in terms of the isothermal compressibility \(\alpha\) and volume expansivity \(\beta\) as (a)...
-
Changes of state such as melting, vaporization and freezing are (a) Adiabatic processes (b) Isothermal processes (c) Isochoric processes (d) Isobaric processes.
-
When the heat capacity ratio is 1.67 , then the ideal gas is (a) Diatomic (b) Monatomic (c) Triatomic (d) None of these.
Study smarter with the SolutionInn App