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Mpima Inv values, advertises and sells residential property on behalf of its customers. The company has been in business for only a short time and

Mpima Inv values, advertises and sells residential property on behalf of its customers. The company has been in business for only a short time and is preparing a cash budget for the first four months of 20X6. Expected sales of residential properties are as follows. 2022 2023 2023 2023 2023 Month December January February March April Units sold 25 30 35 40 45 The average price of each property is K420, 000 and Mpima Inv charges a fee of 9% of the value of each property sold. Mpima Inv receives 5% in the month of sale and the remaining 4% in the month after sale. The company has eleven employees who are paid on a monthly basis. The average salary per employee is K180, 000 per year. If more than 25 properties are sold in a given month, each employee is paid in that month a bonus of K8400 for each additional property sold. Variable expenses are incurred at the rate of 2.5% of the value of each property sold and these expenses are paid in the month of sale. Fixed overheads of K42, 300 per month are paid in the month in which they arise. Mpima Inv pays interest every three months on a loan of K2500, 000 at a rate of 15% per year. The last interest payment in each year is paid in December. An outstanding tax liability of K1200, 000 is due to be paid in April. In the same month Mpima Inv intends to dispose of surplus vehicles, with a net book value of K85, 000, for K92, 000. The cash balance at the start of January 2023 is expected to be a deficit of K410, 000. Required a) Prepare a monthly cash budget for the period from January to April 2023. Your budget must clearly indicate each item of income and expenditure, and the opening and closing monthly cash balances. b) Discuss the factors to be considered by Mpima Inv when planning ways to invest any cash surplus forecast by its cash budgets. c) Discuss the advantages and disadvantages to Mpima Inv of using overdraft finance to fund any cash shortages forecast by its cash budgets. d) Explain how the Baumol model can be employed to reduce the costs of cash management and discuss whether the Baumol cash management model may be of assistance to Mpima Inv for this purpose

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