CASH FLOW BUDGETING This problem involves working out a cash flow budget for 2008. The following information should be all that is needed to complete this problem. The information is in no particular order so carefully check to be sure you have used it all before finishing the problem. Round everything to the nearest whole dollar. Complete a cash flow budget and answer the questions that follow. Beginning inventory (January 1, 2008): Wheat, 8,500 bu. to sell in January of 2008 Beef cows, 140 lead Prices to use: Beef calves - 70 cents per pound Wheat -$3.40 per bushel Cotton - 72 cents per pound Yields: 90% calf crop 32 bu. per acre 575 lbs per acre Additional Information 1. Sells all calves in August at average weight of 450 lbs. (Assume no replacements kept.) 2. Will raise 300 acres of cotton and 450 acres of wheat in 2008. 3. Plans to trade for a new pickup in March, paying $18,500 cash difference. There will be a new intermediate term loan of $14,000 to help pay for it. 4. The new intermediate loan on the pickup will have a semi-annual payment due in August of $2,300 for principal and $750 for interest. 5. Will sell a bull in April for $800 and buy a replacement in May for $2,000. 6. Income and Social Security tax of $15,200 due in March. 7. Family living expenses of $3,000 per month 8. Personal life insurance premium of $2,000 due in April. 9. Cash on hand January 1, 2008, S12,000. 10. Assume all 2004 cotton sold at harvest in October and all wheat produced in 2008 is stored for sale in 2009. 11. Spouse's non-farm job nets $1,500 per month after all deductions. 12. All new borrowing needed will be "current" borrowing except as indicated in #3 above. To simplify calculations, borrow and repay loans in even $100 units. 13. Interest rate is 12% per year or 1% per month on current borrowing, Repay oldest current borrowing first and pay interest only on the amount of principal repaid. 14. Maintain $1000 monthly minimum balance anything between $950 and $1050 is okay). 2008 Estimated Expenses 1. Hired labor 2. Feed and grain 3. Chemicals 4. Machinery hire 5. Machinery repairs 6. Building repairs 7. Livestock expenses 8. Fertilizer 9. Gas, fuel, oil 10. Property taxes 11. Insurance for farm 12. Farm share of auto and pickup 13. Utilities 14. Miscellaneous 15. Seed $18,000 per year, equal amount each month. $6,000 per year, 1/2 in March, 1/2 in December $14,400 per year, 1/2 in April, 1/2 in August $2.800 in October $6,800 per year, half in May, 1/2 in September $4,000 in November $4,800 per year, equal amount each month S14,000 in February $7,200 per year, 1/2 in April, 1/2 September $1.400 per year, 1/2 in June, 1/2 in November $3,000 in February $4,800 per year, equal amount each month $3,600 per year, equal amount each month $2,400 per year, equal amount cach month $5,400 in February Debt Situation as of 1/1/2008 Payment Due in 2008 Current loans Noncurrent loans Balance S25,000 S205,000 Princ. $25,000 $15,500 Interest $2,000 $16,400 Month due February May Question 1: If you were the banker, would you approve a new $80,000 noncurrent loan in July for the purchase of a $115,000 combine? Why or why not? Question 2: If this were your business, would this cash flow budget projection make you feel comfortable, slightly uneasy, very uneasy or "scared to death"? Why? 12. All new borrowing needed will be "current" borrowing except as indicated in #3 above. To simplify calculations, borrow and repay loans in even $100 units. 13. Interest rate is 12% per year or 1% per month on current borrowing. Repay oldest current borrowing first and pay interest only on the amount of principal repaid. 14. Maintain $1000 monthly minimum balance anything between $950 and $1050 is okay). 2008 Estimated Expenses 1. Hired labor 2. Feed and grain 3. Chemicals 4. Machinery hire 5. Machinery repairs 6. Building repairs 7. Livestock expenses 8. Fertilizer 9. Gas, fuel, oil 10. Property taxes 11. Insurance for farm 12. Farm share of auto and pickup 13. Utilities 14. Miscellaneous 15. Seed $18,000 per year, equal amount each month. $6,000 per year, 1/2 in March, 1/2 in December $14,400 per year, 1/2 in April, 1/2 in August $2,800 in October $6,800 per year, half in May, 1/2 in September $4,000 in November $4,800 per year, equal amount each month S14,000 in February $7,200 per year, 1/2 in April, 1/2 September $1.400 per year, 1/2 in June, 1/2 in November $3,000 in February $4,800 per year, equal amount each month $3,600 per year, equal amount each month $2,400 per year, equal amount each month $5,400 in February Debt Situation as of 1/1/2008 Payment Due in 2008 Current loans Noncurrent loans Balance S25,000 S205,000 Princ. $25,000 $15,500 Interest $2,000 $16,400 Month due February May Question 1: If you were the banker, would you approve a new $80,000 noncurrent loan in July for the purchase of a $115,000 combine? Why or why not? Question 2: If this were your business, would this cash flow budget projection make you feel comfortable, slightly uneasy, very uneasy or "scared to death"? Why? CASH FLOW BUDGETING This problem involves working out a cash flow budget for 2008. The following information should be all that is needed to complete this problem. The information is in no particular order so carefully check to be sure you have used it all before finishing the problem. Round everything to the nearest whole dollar. Complete a cash flow budget and answer the questions that follow. Beginning inventory (January 1, 2008): Wheat, 8,500 bu. to sell in January of 2008 Beef cows, 140 lead Prices to use: Beef calves - 70 cents per pound Wheat -$3.40 per bushel Cotton - 72 cents per pound Yields: 90% calf crop 32 bu. per acre 575 lbs per acre Additional Information 1. Sells all calves in August at average weight of 450 lbs. (Assume no replacements kept.) 2. Will raise 300 acres of cotton and 450 acres of wheat in 2008. 3. Plans to trade for a new pickup in March, paying $18,500 cash difference. There will be a new intermediate term loan of $14,000 to help pay for it. 4. The new intermediate loan on the pickup will have a semi-annual payment due in August of $2,300 for principal and $750 for interest. 5. Will sell a bull in April for $800 and buy a replacement in May for $2,000. 6. Income and Social Security tax of $15,200 due in March. 7. Family living expenses of $3,000 per month 8. Personal life insurance premium of $2,000 due in April. 9. Cash on hand January 1, 2008, S12,000. 10. Assume all 2004 cotton sold at harvest in October and all wheat produced in 2008 is stored for sale in 2009. 11. Spouse's non-farm job nets $1,500 per month after all deductions. 12. All new borrowing needed will be "current" borrowing except as indicated in #3 above. To simplify calculations, borrow and repay loans in even $100 units. 13. Interest rate is 12% per year or 1% per month on current borrowing, Repay oldest current borrowing first and pay interest only on the amount of principal repaid. 14. Maintain $1000 monthly minimum balance anything between $950 and $1050 is okay). 2008 Estimated Expenses 1. Hired labor 2. Feed and grain 3. Chemicals 4. Machinery hire 5. Machinery repairs 6. Building repairs 7. Livestock expenses 8. Fertilizer 9. Gas, fuel, oil 10. Property taxes 11. Insurance for farm 12. Farm share of auto and pickup 13. Utilities 14. Miscellaneous 15. Seed $18,000 per year, equal amount each month. $6,000 per year, 1/2 in March, 1/2 in December $14,400 per year, 1/2 in April, 1/2 in August $2.800 in October $6,800 per year, half in May, 1/2 in September $4,000 in November $4,800 per year, equal amount each month S14,000 in February $7,200 per year, 1/2 in April, 1/2 September $1.400 per year, 1/2 in June, 1/2 in November $3,000 in February $4,800 per year, equal amount each month $3,600 per year, equal amount each month $2,400 per year, equal amount cach month $5,400 in February Debt Situation as of 1/1/2008 Payment Due in 2008 Current loans Noncurrent loans Balance S25,000 S205,000 Princ. $25,000 $15,500 Interest $2,000 $16,400 Month due February May Question 1: If you were the banker, would you approve a new $80,000 noncurrent loan in July for the purchase of a $115,000 combine? Why or why not? Question 2: If this were your business, would this cash flow budget projection make you feel comfortable, slightly uneasy, very uneasy or "scared to death"? Why? 12. All new borrowing needed will be "current" borrowing except as indicated in #3 above. To simplify calculations, borrow and repay loans in even $100 units. 13. Interest rate is 12% per year or 1% per month on current borrowing. Repay oldest current borrowing first and pay interest only on the amount of principal repaid. 14. Maintain $1000 monthly minimum balance anything between $950 and $1050 is okay). 2008 Estimated Expenses 1. Hired labor 2. Feed and grain 3. Chemicals 4. Machinery hire 5. Machinery repairs 6. Building repairs 7. Livestock expenses 8. Fertilizer 9. Gas, fuel, oil 10. Property taxes 11. Insurance for farm 12. Farm share of auto and pickup 13. Utilities 14. Miscellaneous 15. Seed $18,000 per year, equal amount each month. $6,000 per year, 1/2 in March, 1/2 in December $14,400 per year, 1/2 in April, 1/2 in August $2,800 in October $6,800 per year, half in May, 1/2 in September $4,000 in November $4,800 per year, equal amount each month S14,000 in February $7,200 per year, 1/2 in April, 1/2 September $1.400 per year, 1/2 in June, 1/2 in November $3,000 in February $4,800 per year, equal amount each month $3,600 per year, equal amount each month $2,400 per year, equal amount each month $5,400 in February Debt Situation as of 1/1/2008 Payment Due in 2008 Current loans Noncurrent loans Balance S25,000 S205,000 Princ. $25,000 $15,500 Interest $2,000 $16,400 Month due February May Question 1: If you were the banker, would you approve a new $80,000 noncurrent loan in July for the purchase of a $115,000 combine? Why or why not? Question 2: If this were your business, would this cash flow budget projection make you feel comfortable, slightly uneasy, very uneasy or "scared to death"? Why