Cash

budgetAdvanced

The actual sales and purchases for Xenocore, Inc., for September and October

2019,

along with its forecast sales and purchases for the period November

2019

through April

2020,

follow

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.

The firm makes

30%

of all sales for cash and collects on

35%

of its sales in each of the 2 months following the sale. Other cash inflows are expected to be

$14,000

in September and April,

$15,000

in January and March, and

$25,000

in February. The firm pays cash for

12%

of its purchases. It pays for

55%

of its purchases in the following month and for

33%

of its purchases 2 months later. Wages and salaries amount to

20%

of the preceding month's sales. Rent of

$18,000

per month must be paid. Interest payments of

$12,000

are due in January and April. A principal payment of

$25,000

is also due in April. The firm expects to pay cash dividends of

$19,000

in January and April. Taxes of

$80,000

are due in April. The firm also intends to make a

$26,000

cash purchase of fixed assets in December.

a. Assuming that the firm has a cash balance of

$23,000

at the beginning of November, determine the end-of-month cash balances for each month, November through April.

b. Assuming that the firm wishes to maintain a

$17,000

minimum cash balance, determine the required total financing or excess cash balance for each month, November through April.

c. If the firm were requesting a line of credit to cover needed financing for the period November to April, how large would this line have to be? Explain your answer.