3. Calculating the Cash Budget. Wildcat, Inc., has estimated sales (in millions) for the next four quarters as follows:

Q1 Q2 Q3 Q4

Sales $230 $195 $270 $290

Sales for the first quarter of the year after this one are projected at $250 million. Accounts Receivable at the beginning of the year were $79 million. Wildcat has a 45 day collection period.

Wildcats purchases from suppliers in a quarter are equal to 45 percent of the next quarters forecast sales, and suppliers are normally paid in 36 days. Wages, taxes, and other expenses run about 30 percent of sales. Interest and dividends are $15 million per quarter.

Wildcat plans a major capital outlay in the second quarter of $90 million. Finally, the company started the year with a $73 million cash balance and wishes to maintain a $30 million balance.

a. Complete a cash budget for Wildcat by filling in the following:

WILDCAT, INC.

Cash Budget (in millions)

Q1 Q2 Q3 Q4

Beginning cash balance	$73
Net cash inflow
Ending cash balance
Minimum cash balance	30
Cumulative surplus (deficit)

b. Assume that Wildcat can borrow any needed funds on a short-term basis at a rate of 3 percent per quarter, and can invest any excess funds in short-term marketable securities at a rate of 2 percent 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?

WILDCAT, INC.

Short-Term Financial Plan

(in millions)

Q1 Q2 Q3 Q4

Beginning cash balance	$73
Net cash inflow
New short-term investments
Income on short-term investments
Short-term investments sold
New short-term borrowing
Interest on short-term borrowing
Short-term borrowing repaid
Ending cash balance
Minimum cash balance
Cumulative surplus (deficit)
Beginning short-term investments
Ending short-term investments
Beginning short-term debt
Ending short-term debt
Excess funds at start of quarter of
Excess funds at start of quarter of
Excess funds at start of quarter of
Excess funds at start of quarter of
Net cash cost
Q1
Q2
Q3
Q4
Cash generated by short-term financing