Blundel Inc. had sales of $$130$ million in Q$4$ of last year and has estimated sales $($in

millions$)$ for the next four quarters as follows: $Q1=$$$160,Q2=$$$175,Q3=$$$190,Q4=$

$$125.$ Sales for the first quarter of the year after this one is projected at $$170$ million.

Blundel has a $45-$day collection period. Blundel's purchases from suppliers in a quarter

are equal to $45\%$ of the next quarter's forecast sales, and suppliers are normally paid in

$30$ days. Wages, taxes, and other expenses run about $25\%$ of sales and are paid for

during the same quarter. Interest and dividends are $$12$ million per quarter. Blundel

plans a major capital outlay in the third quarter of $$35$ million. Finally, the company

started the year with a $$40$ million cash balance. Assume that Blundel maintains a

minimum cash balance of $$40$ million.

Blundel can borrow any needed funds on a short$-$term basis at a rate of $4\%$ per quarter

and can invest any excess funds in short$-$term marketable securities at a rate of $2\mathrm{.}5\%$

per quarter.

I. What is the net cash flow in Q$1$ and Q$2?$

II$.$ During Q$1,$ does the company borrow for deficit of fund or invest due to surplus of

funds? What is the amount of borrowing$/$investing$,$ if any?