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Camp and Fevurly Financial Planners have forecasted revenues for the first six months of 2012, as shown in the following table. The firm collects 60%
Camp and Fevurly Financial Planners have forecasted revenues for the first six months of 2012, as shown in the following table. The firm collects 60% of its sales immediately, 39% one month after the sale, and 1% are written off as bad debts two months after the sale. The firm assumes that wages and benefits paid to clerical personnel will be $7,000 per month while commissions to sales associates average 25% of collectable sales. Each of the two partners is paid $5,000 per month or 20% of net sales, whichever is greater. Commissions and partner salaries are paid one month after the revenue is earned. Rent expense for their office space is $3,500 per month, and lease expense for office equipment is $800. Utilities average $250 per month, except in May and June when they average only $150. The ending cash balance in December 2011 was $12,000. Create a cash budget for January to June 2012, and determine the firm's ending cash balance in each month assuming that the partners wish to maintain a minimum cash balance of $10,000. Camp and Fevurly are thinking of obtaining a line of credit from then-bank. Based on their expectations for the first six months of the year, what is the minimum amount that would be necessary? Round your answer to the next highest $1,000 and ignore interest charges on short-term debt. Create three scenarios (best case, base case, and worst case) assuming that revenues are 10% better than expected, exactly as expected, or 10% worse than expected. What is the maximum that the firm would need to borrow to maintain its minimum cash balance in all three cases? Use the Scenario Manager and create a summary of your results. Would this change your answer in part b
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