and repay it in one year? 15. Calculating the Cash Budget (L04) Cottonwood Inc. has estimated sales (in millions) for the next four quarters as follows: Q1 Q2 Q3 Q4 8160 $175 $190 Sales $215 Sales for the first quarter of the year after this one are projected at $170 million. Accounts receivable at the beginning of the year were $68 million. Cottonwood has a 45-day collection period. Cottonwood's purchases from suppliers in a quarter are equal to 45% of the next quarter's forecast sales, and suppliers are normally paid in 36 days. Wages, taxes, and other expenses run about 25% of sales. Interest and dividends are $12 million per quarter. Cottonwood plans a major capital outlay in the second quarter of $75 million. Finally, the company started the year with a $49 million cash balance and wishes to maintain a $30 million minimum balance. a. Complete a cash budget for Cottonwood by filling in the following: Q3 COTTONWOOD INC. Cash Budget (in $ millions) O Q2 Beginning cash balance 849 Net cash inflow Q4 Ending cash balance Minimum cash balance 30 Cumulative surplus (deficit) b. Assume that Cottonwood can borrow any needed funds on a short-term basis at a rate of 3% per quarter and can invest any excess funds in short-term marketable securities at a rate of 2% 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? COTTONWOOD INC. Short-Term Financial Plan (In $ millions) Q1 Q2 Q3 Q4 $30 Beginning cash balance Net cash inflow New short-term investments Income from 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) 30 Beginning short-term investments Ending short-term investments Beginning short-term debt Ending short-term debt