HOMEWORK 15 Working Capital Management Due on Tomorrow at 11 59 PM CST 7. Cash budget Aa Aa The cash budget is considered the primary forecasting tool when firms try to estimate their cash flows and figure out if they are likely to need additional cash flows or to generate surplus cash. Consider the case of Mooney Equipment: Mooney Equipment is putting together its cash budget for the following year and has forecasted expected cash collections over the next five quarters (one year plus the first quarter of the next year). The cash collection estimates are based on sales projections and expected collection of receivables. The sales and cash collection estimates are shown in the following table (in millions of dollars): Q1 Q2 Q3 Q4 Q5 $1,650 $1,950 $2,000 $1,800 $2,050 Sales Total cash collections $1,650 $1,700 $1,750 $1,750 You also have the following information about Mooney Equipment: any given period, Mooney's purchases from suppliers generally account for 76% of the expected sales in the next period, and wages, supplies, and taxes are expected to be 15% of next period's sales. In the third quarter, Mooney expects to expand one of its plants, which will require an additional s1,076 million investment. Every quarter, Mooney pays s5 million in interest and dividend payments to long-term debt,and equity Mooney prefers to keep a minimum target cash balance of at least $15 million at all times. Activity Information