Construct a short-term financial plan for Springfield Snowboards based on its expansion opportunity described in the "Positive Cash Flow Shocks" part of Section 20.1. Base the plan on the following table, which forecasts additional capital expenditures, marketing (SG&A), and working capital in Q1 and Q2 along with higher sales in Q2 to Q4. Assume that Springfield ends 2017 with $1 million in cash and that its bank will offer it a short-term loan at the rate 2.5% per quarter. Assume that the minimum cash balance to be maintained is $500,000. (Note that $500,000 is 500 in the tables, where all figures are in thousands of dollars.)

Complete the cash budget based on the assumptions of the problem. (Round to the nearest integer.) Answer:

Cash Balance and Short-Term Financing ($000)	2017Q4	2018Q1	2018Q2	2018Q3	2018Q4
Starting Cash Balance
Change in Cash and Equivalents
Minimum Cash Balance		500	500	500	500
Surplus (Deficit) Relative to Minimum		[sur	[sur	[sur	[sur
Existing Short-term Financing
Increase (Decrease) in Short-Term Financing
Total Short-term Financing
Ending Cash Balance	1000

Answer: The correct statement from the following is (answer "A", "B", "C", or "D".) A. They will need to borrow $426,000 for the first quarter of 2018, and they will pay back the loan during Q4 of 2018. B. They will need to borrow $426,000 for the second quarter of 2018, and they will pay back the loan during Q3 of 2018. C. They will need to borrow $426,000 for the first quarter of 2018, and they will pay back the loan during Q2 of 2018. D. They will need to borrow $426,000 for the third quarter of 2018, and they will pay back the loan during Q4 of 2018.

Answer rating: 100% (QA)

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