E5-41B. (Learning Objective 3: Preparing a cash budget) Fellow Communications, Inc., is preparing its cash budget for 20X7. Fellow ended 20X6 with cash of €85 million, and managers need to keep a cash balance of at least €82 million for operations.

Collections from customers are expected to total €11,317 million during 20X7, and payments for the cost of services and products should reach €6,184 million. Operating expense payments are budgeted at €2,546 million.

During 20X7, Fellow expects to invest €1,841 million in new equipment and sell older assets for €125 million. Debt payments scheduled for 20X7 will total €602 million.

The company forecasts net income of €883 million for 20X7 and plans to pay dividends of

€321 million.

Prepare Fellow Communications’ cash budget for 20X7. Will the budgeted level of cash receipts leave Fellow with the desired ending cash balance of €82 million, or will the company need additional financing? If so, how much?