16-2A. (Analysis of recessionary cash flows) Ontherise, Inc. is considering expanding its bagel bakery business with the acquisition ofnew equipment to be financed entirely with debt. The company does not have any other debt or preferred stock outstanding. The company currently has a cash baJan(t of $200,000, which is the minimum Baruch Chavez, the CFO of Ontherise, believes to be desirable, Baruch has determined that the following relationships exist among the company's various items of cash flow (except as noted, all are expressed as a percentage ofcash collections on sales):

Other cash receipts 5%

Cash Disbursements for:

Payroll 30%

Raw materials 25%

Nondiscretionary expenditures (essentially fixed, thus not percent of sales) $500,000 The new debt would carry fixed financial charges of $140,000 the first year (interest, $90,000, plus principal-sinking fund, $50,000). To evaluate the sensitivity of the proposed debt plan to economic fluctuations, Baruch would like to determine how low cash collections from sales could be in the next year while ensuring that the cash balance at the end of the year is the rninimumhe considers necessary.