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

Q$1$ Q$2$ Q$3$ Q$4$

Sales $$170$ $$185$ $$200$ $$225$

INTERMEDIATE

$($Questions $1316)$

$642$

PART $7$ Short$-$Term Financial Planning and Management

Sales for the first quarter of the following year are projected at $$180$ million. Accounts

receivable at the beginning of the year were $$71$ million. Wildcat has a $45-$day collection period.

Wildcat$$s purchases from suppliers in a quarter are equal to $45$ percent of the next

quarter$$s forecast sales, and suppliers are normally paid in $36$ days. Wages, taxes, and

other expenses run about $25$ percent of sales. Interest and dividends are $$14$ million

per quarter.

Wildcat plans a major capital outlay in the second quarter of $$85$ million. Finally,

the company started the year with a $$54$ million cash balance and wishes to maintain

a $$30$ million minimum balance.

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

WILDCAT, INC.

Cash Budget

$($in millions$)$

Q$1$ Q$2$ Q$3$ Q$4$

Beginning cash balance $$54$

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$)$

Q$1$ Q$2$ Q$3$ Q$4$

Target cash balance $$30$

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$)$

Beginning short$-$term investments

Ending short$-$term investments

Beginning short$-$term debt

Ending short$-$term debt