1. 15.

Calculating the cash budget [LO 18.3] Kalamunda Foods Limited has estimated sales (in millions) for the next four quarters as follows:

1.
Sales for the first quarter of the following year are projected at $180 million. Accounts receivable at the beginning of the year were $71 million. Kalamunda has a 45-day collection period.
Kalamunda’s purchases from suppliers in a quarter are equal to 45 per cent of the next quarter’s forecast sales, and suppliers are normally paid in 36 days. Wages, taxes and other expenses run about 25 per cent of sales. Interest and dividends are $14 million per quarter.
Kalamunda plans a major capital outlay in the second quarter of $85 million. Finally, the company started the year with a $54 million cash balance and wishes to maintain a $30 million minimum balance.
1. Complete a cash budget for Kalamunda by filling in the following:
Kalamunda Foods Limited Cash budget (in millions)

1.
2. Assume that Kalamunda can borrow any needed funds on a shortterm basis at a rate of 3 per cent per quarter and can invest any excess funds in short-term marketable securities at a rate of 2 per cent per quarter. Prepare a short-term financial plan by filling in the following schedule. What is the net cash cost (total interest paid minus total investment income earned) for the year?
Kalamunda Foods Limited Short-term financial plan (in millions)

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Q1 Q2 Q3 Q4 Sales $170 $185 $200 $225