BF1122MU QUESTIONS Ahmed Lad is considering investing in a new machine in November which costs 60,000 and has a five year useful economic life. In order to support the request for funding Ahmed Lad has produced a Profit and Loss(P&l.) forecast for the new project covering the first six months of is life which he has presented to the bank (this is presented below). However, the bank has claimed that this P&l. is insufficient for the bank to make a lending decision and has requested a detailed month-by-month cash flow forecast. (All figures in D April Now BIRO Dec 110NXO Jan 121,000 Feb 143, March 180/ 190.000 Sales Less: Variable Costs Materul Cuts MONO mir ints 4.000 11.NO 33.NO 66XXO 13,300 300,00 17.00 99. IND 22. INO 22.10 121 KO 26,400 32.600 15.400 29.040 35.860 Contribution Less: Fixed Costs Depreciation Overheads Operating Profit 1,6XO 11.000 21,000 1,000 11,000 18,800 100 11,400 1.NO 16,500 4,500 1.0XXO 16,500 15,100 1/XO 16,500 18,360 The following additional information is available: 1) Sales are 40). cash and 60. credit. Credit Sales are paid two months after the month of sale. 2) Purchases are paid in the month following the purchase. 3) 75. of wages are paid in the current month and 25 the following month. 4) Overheads are paid in the month after they are incurred. 5) There will be a dividend payment of 10,000 in March. 6) Capital Expenditure is paid two months after it is incurred. 7) The management of Ahmed will contribute [16,500 in cash into the project to start with. Required: (a) Prepare a month-by-month cash flow forecast, including a total column, for the first six months of the project's life. Include cash brought forward and cash carried forward amounts cach month starting with the initial cash amount abewe made available to the project. (12 marks) 6) Discuss the cash position of the business as shown by your cash flow forecast in part (a) and how the business could improve its cash position (8 marks) WORD COUNT GUIDANCE: 300 WORDS+/-10% Total 20 Marks This assessment is subject to the University Assessment Regulations for Candidates