2. Cash budget Aa Aa The cash budget is considered the primary forecasting tool when firms try to estimate their cash flows and figure out if they are likely to need additional cash flows or to generate surplus cash. Consider the case of Mooney Equipment: Mooney Equipment is putting together its cash budget for the following year and has forecasted expected cash collections over the next five quarters (one year plus the first quarter of the next year). The cash collection estimates are based on sales projections and expected collection of receivables. The sales and cash collection estimates are shown in the following table (in millions of dollars): Q1 $1,100 $1,100 Sales Total cash collections Q2 $1,400 $1,150 Q3 $1,450 $1,200 Q4 $1,250 $1,200 Q5 $1,500 You also have the following information about Mooney Equipment: In any given period, Mooney's purchases from suppliers generally account for 80% of the expected sales in the next period, and wages, supplies, and taxes are expected to be 15% of next period's sales. In the third quarter, Mooney expects to expand one of its plants, which will require an additional $1,080 million investment. Every quarter, Mooney pays $45 million in interest and dividend payments to long-term debt and equity investors. Mooney prefers to keep a minimum target cash balance of at least $16 million at all times. Every quarter, Mooney pays $45 million in interest and dividend payments to long-term debt and equity investors. Mooney prefers to keep a minimum target cash balance of at least $16 million at all times. Using the preceding information, answer the following questions: What is the net cash inflow that Mooney expects in the third quarter (Q3)? If Mooney is beginning this year with a cash balance of $40 million and expects to maintain a minimum target cash balance of at least $16 million, what will be its likely cash balance at the end of the year (after Q4)? What is the maximum investable funds that the firm expects to have in the next year? What is the largest cash deficit that the firm expects to suffer in the next year? True or False: If a firm changes its credit policy and allows customers to pay in 90 days instead of 60 days, and everything else remains the same, the net cash flow in the next quarter is likely to decrease. True False Using the preceding information, answer the following questions: What is the net cash inflow that Mooney expects in the third quarter (23)? If Mooney is beginning this year with a cash balance of $40 million and expects to maintain a minimum target cash balance of at least $16 million, what will be its likely cash balance at the end of the year (after Q4)? What is the maximum investable funds that the firm expects to have in the next year? What is the largest cash deficit that the firm expects to suffer in the next year? -$1,113 million -$275 million -$273 million - $270 million Using the preceding information, answer the following questions: What is the net cash inflow that Mooney expects in the third quarter (Q3)? If Mooney is beginning this year with a cash balance of $40 million and expects to maintain a minimum target cash balance of at least $16 million, what will be its likely cash balance at the end of the year after Q4)? What is the maximum investable funds that the firm expects to have in the next year? What is the largest cash deficit that the firm expects to suffer in the next year? - $508 million - $1,621 million -$235 million - $1,891 million Using the preceding information, answer the following questions: What is the net cash inflow that Mooney expects in the third quarter (23)? If Mooney is beginning this year with a cash balance of $40 million and expects to maintain a minimum target cash balance of at least $16 million, what will be its likely cash balance at the end of the year (after Q4)? What is the maximum investable funds that the firm expects to have in the next year? What is the largest cash deficit that the firm expects to suffer in the next year? - $251 million -$176 million -$213 million -$126 million True Falco. TF firm change it rodit olivand allow Cutomore to win an dave intoad of 60 dave and Using the preceding information, answer the following questions: What is the net cash inflow that Mooney expects in the third quarter (Q3)? If Mooney is beginning this year with a cash balance of $40 million and expects to maintain a minimum target cash balance of at least $16 million, what will be its likely cash balance at the end of the year (after Q4)? What is the maximum investable funds that the firm expects to have in the next year? What is the largest cash deficit that the firm expects to suffer in the next year? - $954 million -$1,335 million -$1,907 million -$1,144 million True or False: If a firm changes its credit policy and allows customers to pay in 90 days instead eventhing else remains the same the net cash flow in the neyt quarter is likely to decrease