1. Create a cash budget for the next year. Use the proper forecasting techniques (from Chapter 1) and defend your reasoning for your choice of technique.

You are a financial analyst in the Bridgetown Foundation—a public service agency in Chicago that provides specialized mental care services to the poor.
The foundation’s financial resources are mainly from various state and federal grants and business or individual donations. In a recent financial audit, an independent auditor suggested the foundation explore the possibility of investing in the market as an additional revenue source. You are assigned the responsibility of analyzing the foundation’s cash flows to determine whether such a possibility exists and, if it does, how much the foundation should invest and what the investment strategy should be. You pull out the cash flow information for the last three years as shown in Table 8.7.

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Monthly Cash Flows: Bridgetown Foundation ($) Two years ago Cash balance (January 1st) 610,000 Last year 1,245,000 Current year 2,016,770 Receipts 865,000 873,650 871,903 Disbursements 1,050,000 930,000 928,140 Net cash flow, January -185,000 -56,350 -56,237 Cash balance (February 1st) 425,000 1,188,650 1,960,533 Receipts 250,000 250,500 249,999 Disbursements 240,000 240,480 239,999 Net cash flow, February 10,000 10,020 10,000 Cash balance (March 1st) 435,000 1,198,670 1,970,533 Receipts 300,000 303,000 302,394 Disbursements 280,000 282,800 282,234 Net cash flow, March 20,000 20,200 20,160 Cash balance (April 1st) 455,000 1,218,870 1,990,692 Receipts 570,000 575,700 574,549 Disbursements 325,000 328,250 327,594 Net cash flow, April 245,000 247,450 246,955 Cash balance (May 1st) 700,000 1,466,320 2,237,647 Receipts 1,096,000 1,106,960 980,500 Disbursements 320,000 323,200 945,000 Net cash flow, May 776,000 783,760 35,500 Cash balance (June 1st) 1,476,000 2,250,080 2,273,147 Receipts 134,000 135,340 135,069 Disbursements 320,000 323,200 322,554 Net cash flow, June -186,000 -187,860 -187,484