Comment Response: I'm not sure what you mean by all images are not visible? I'm looking at them right now. Maybe you need to access the question from a different browser or platform (desktop vs. mobile).

TOOLS FOR FRNANCIAL IMPLEMENTATION 110 4. CASH MANAGEMENT IN BRIDGETOWN You are a financial analyst in the Bridgetown Foundation-a public service agency in Chicago that provides specialized mental care services to the poor. The foundation's financial resources are mainly from various state and federal grants and business or individual donations. In a recent financial audit, an independent auditor suggested the foundation explore the possibility of investing in the market as an additional revenue source. You are assigned the responsibility of analyzing the foundation's cash flows to determine whether such a possibility exists and, if it does, how much the founda tion should invest and what the investment strategy should be. You pull out the cash flow information for the last three years as shown in Table 8.7. Table 8.7 Monthly Cash Flows: Bridgetown Foundation ($) Two years ago Last year Current year 1,245,000 873.650 930,000 -56,350 Cash balance (January 1st) Receipts Disbursements Net cash flow, January 2.016.770 871,903 928,140 -58,237 610,000 865,000 1,050,000 185,000 Cash balance (February 1st) Receipts Disbursements Net cash flow, February 425,000 250,000 240,000 10,000 1,188.650 1,960.533 250.500 240.480 10,020 249.999 239.999 10,000 Cash balance (March 1st) Receipts Disbursements Net cash flow, March 435,000 300,000 280,000 20,000 1,198.670 303.000 282.800 20,200 1,970,533 302.394 282,234 20,160 1,218,870 575.700 328,250 Cash balance (April 1st) Receipts Disbursements Net cash flow, April 455,000 570,000 325,000 245,000 1,990,692 574,549 327,594 246,955 247,450 1,466,320 1,106,960 323,200 783.760 Cash balance (May 1st) Receipts Disbursements Net cash flow, May 700,000 1,096,000 320,000 776,000 2.237,647 980.500 945,000 35.500 Cash balance (June 1st) Receipts Disbursements Net cash flow, June 1,476,000 134,000 320,000 -186,000 2.250.080 135,340 323,200 -187.860 2.273.147 135.069 322.554 -187.484 (continued) CASH MANAGEMENT 111 Table 8.7 (continued) Two years ago Last year Current year Cash balance (July 1st) Receipts Disbursements 2.085.663 1,290,000 2,062,220 282.800 513.080 -230,280 280,000 508,000 -228.000 282,234 512,054 -229,819 Net cash flow, July Cash balance (August 1st) Receipts Disbursements Net cash flow, August 1,062.000 370,000 325.000 45,000 1,831,940 373,700 1,855,844 372.953 328,250 45,450 327,594 45,359 Cash balance (September 1st) Receipts Disbursements Net cash flow, September 1,107.000 285.000 315,000 -30,000 1,877,390 287.850 1,901,203 287,274 317,514 -30,239 318,150 -30,300 1,077,000 270.000 335,000 -65.000 1,847,090 272,700 338,350 -65,650 Cash balance (October 1st) Receipts Disbursements Net cash flow, October 1,870,963 272.155 337,673 -65,519 Cash balance (November 1st) Receipts Disbursements Net cash flow, November 1,012.000 892,000 320,000 572,000 1,781,440 900.920 1,805,445 899.118 322,554 576,565 323.200 SES. 577,720 Cash balance (December 1st) Receipts Disbursements Net cash flow, December 1,584,000 116,000 455.000 -339,000 2,359,160 117,160 459,550 -342,390 2,382.009 116.926 458.631 -341,705 Average monthly Beginning cash balance Receipts Disbursements 936.083 452.333 399,417 52.917 1,693.903 456,690 392.376 64,314 2,029,204 445,423 443,462 1,961 Net cash flow . Create a cash budget for the next year. Use the proper forecasting techniques (from Chapter 1) and defend your reasoning for your choice of technique. 2. Assuming a lower limit of $1,000,000, a transaction fee of $200, and a 5 percent annual interest rate, use the Miller-Orr model to determine the upper limit and the return point of the cash balance. 3. Do you see any investment opportunities for the foundation's cash? If yes develop an investment strategy for the foundation. TOOLS FOR FRNANCIAL IMPLEMENTATION 110 4. CASH MANAGEMENT IN BRIDGETOWN You are a financial analyst in the Bridgetown Foundation-a public service agency in Chicago that provides specialized mental care services to the poor. The foundation's financial resources are mainly from various state and federal grants and business or individual donations. In a recent financial audit, an independent auditor suggested the foundation explore the possibility of investing in the market as an additional revenue source. You are assigned the responsibility of analyzing the foundation's cash flows to determine whether such a possibility exists and, if it does, how much the founda tion should invest and what the investment strategy should be. You pull out the cash flow information for the last three years as shown in Table 8.7. Table 8.7 Monthly Cash Flows: Bridgetown Foundation ($) Two years ago Last year Current year 1,245,000 873.650 930,000 -56,350 Cash balance (January 1st) Receipts Disbursements Net cash flow, January 2.016.770 871,903 928,140 -58,237 610,000 865,000 1,050,000 185,000 Cash balance (February 1st) Receipts Disbursements Net cash flow, February 425,000 250,000 240,000 10,000 1,188.650 1,960.533 250.500 240.480 10,020 249.999 239.999 10,000 Cash balance (March 1st) Receipts Disbursements Net cash flow, March 435,000 300,000 280,000 20,000 1,198.670 303.000 282.800 20,200 1,970,533 302.394 282,234 20,160 1,218,870 575.700 328,250 Cash balance (April 1st) Receipts Disbursements Net cash flow, April 455,000 570,000 325,000 245,000 1,990,692 574,549 327,594 246,955 247,450 1,466,320 1,106,960 323,200 783.760 Cash balance (May 1st) Receipts Disbursements Net cash flow, May 700,000 1,096,000 320,000 776,000 2.237,647 980.500 945,000 35.500 Cash balance (June 1st) Receipts Disbursements Net cash flow, June 1,476,000 134,000 320,000 -186,000 2.250.080 135,340 323,200 -187.860 2.273.147 135.069 322.554 -187.484 (continued) CASH MANAGEMENT 111 Table 8.7 (continued) Two years ago Last year Current year Cash balance (July 1st) Receipts Disbursements 2.085.663 1,290,000 2,062,220 282.800 513.080 -230,280 280,000 508,000 -228.000 282,234 512,054 -229,819 Net cash flow, July Cash balance (August 1st) Receipts Disbursements Net cash flow, August 1,062.000 370,000 325.000 45,000 1,831,940 373,700 1,855,844 372.953 328,250 45,450 327,594 45,359 Cash balance (September 1st) Receipts Disbursements Net cash flow, September 1,107.000 285.000 315,000 -30,000 1,877,390 287.850 1,901,203 287,274 317,514 -30,239 318,150 -30,300 1,077,000 270.000 335,000 -65.000 1,847,090 272,700 338,350 -65,650 Cash balance (October 1st) Receipts Disbursements Net cash flow, October 1,870,963 272.155 337,673 -65,519 Cash balance (November 1st) Receipts Disbursements Net cash flow, November 1,012.000 892,000 320,000 572,000 1,781,440 900.920 1,805,445 899.118 322,554 576,565 323.200 SES. 577,720 Cash balance (December 1st) Receipts Disbursements Net cash flow, December 1,584,000 116,000 455.000 -339,000 2,359,160 117,160 459,550 -342,390 2,382.009 116.926 458.631 -341,705 Average monthly Beginning cash balance Receipts Disbursements 936.083 452.333 399,417 52.917 1,693.903 456,690 392.376 64,314 2,029,204 445,423 443,462 1,961 Net cash flow . Create a cash budget for the next year. Use the proper forecasting techniques (from Chapter 1) and defend your reasoning for your choice of technique. 2. Assuming a lower limit of $1,000,000, a transaction fee of $200, and a 5 percent annual interest rate, use the Miller-Orr model to determine the upper limit and the return point of the cash balance. 3. Do you see any investment opportunities for the foundation's cash? If yes develop an investment strategy for the foundation