pls do question 5 only

Question 5 - Cash Budget (30 marks) B D E F G Mountain Sports has aquired an open line of credit up to a maximum of $350,000. It will be necessary to convince the bank manager of this new Canmore branch ability to repay its line of credit including any interest. 3 Management has provided the following list of assumptions to help in the preparation of the cash budget (note: you will need to use the projected income statement provided in Question 4 to complete the cash budget): 1 5 6 1. Beginning cash balance invested by owne 7 S 59,000 2. Sales by quarter (as % of total projected sales) Quarter 1 Quarter 2 Quarter 3 Quarter 4 9 in 2496 2196 2696 29% D H 14 16 11 3. Type of collections from customers: 12 Cash Sales 38% 13 Credit Sales (accounts receivable) 62% 15 Cash sales are collected in the quarter of the sale, all credit salgs are collected in the quarter after the sale. 17 4. Merchandise purchases Merchandise purchases (cost of goods sold) are all paid in the quarter following purchase. (Quarter I purchases are 18 bought in Quarter 1 but paid for in quarter 2). 20 5. Operating expenses 21 All other operating expenses (all expenses except cost of goods sold) are paid on a monthly basis. 19 22 6. Required investment in equipment paid in cash in the first quarter 23 24 $ 138,000 B D 24 25 7. Quarterly income tax payments paid in cash 26 27 8. Minimum cash balance $ 7,000 28 30,000 29 9. Borrowing and Repayments: Any borrowing will take place on the first day of the quarter and any repayments are paid at the end of the quarter. All borrowing and payments are made in increments of $1,000. Interest on borrowing can be ignored. 30 31 Required: Prepare a cash budget for the first year of operation in Canmore by quarter and in total. Show clearly on your budget the quarter(s) in which borrowing will be needed and the quarter(s) in which repayments can be made, as requested by the company's bank. 32 Mountain Sports Cash Rudoet Mountain Sports Cash Budget For the year ended December 31 + Quarter 33 34 35 36 Percent of Sales 17 Estimated Sales 3a Note from structor 1 24% $123,840 21% $108,360 26% $134, 1601 4 29% $149,640 Year Summary 100 $516 000 39 CASH BALANCE, Beginning $ 59.000 Total sales amount taken from question 4 Remember to refer to question as this Cashbudget is a continuation of the Carmore expansion introduced in Question 4. This will be important for the cash disbursements as well! 40 Collections from customers 41 Cash Sales Srait les voget (30 marks B D 12 Credit Sales 43 CASH AVAILABLE 44 Less: Cash Payments 45 Merchandise purchases (COGS) Sales Commissions 47 Advertising 49 Property Taxes 49 Rent 50 Salaries & Wages B D 50 Salaries & Wages 51 Equipment Purchase 52 Income tax Installment 53 Total Disbursements 54 Cash Excess (Deficiency) 55 Financing (Note 1) 56 Borrow Repayment of Principal (show as negative) 57 58 Net Financing B 3 Net Financing G Cash Balance, Ending 1 Note 1: Financing Calculations Cash excess (Deficiency) 3. Minimum cash balance Amount to borrow (repay) Borrowing (Repayments) Rounded to 5 increment of $1,000 B Question 4 - Performance Measurement (8 marks) 2 The president feels very strongly that Mountain Sports should expand operations to a second location. She has even found a prime location in Canmore, Alberta, One of the great things about Canmore is its proximity to the mountains, and its only about 10 minutes away from this beautiful, vibrant and internationally known Banff tourist town. Research indicates that the Canmore market is well suited to both cross-country skis and bikes that competition is fairly limited mo The investment in assets (cash inventory equipment) required for the new Minimum required return on investments Actual 2019 return on investment of the original location $ 179.000 16% 1696 7 8 Management has provided the following income statement to the bank manager the expected Static Budget % Amount B 10 Sales in Units 4,128 11 Sales 516,000 100% 12 Less: Variable Costs: 13 Cost of Goods Sold 218,000 42% 14 Sales Commissions 77,400 15% 15 Total Variable Costs 295,400 57% 16 Contribution Margin 220,600 43% 17 Less: Fixed Costs: 18 Advertising 20,000 19 Property Taxes 9,000 20 Rent 44,000 21 Salaries & Wages 112,000 22 Total Fixed Costs 185,000 23 Net Operating Income 35,600 24 25 Part A: (4 marks) Calculate the following performance measurements for the proposed Canmore expansion: 25 Part A: 4 marks) Calculate the following performance measurements the rooted Canmore expansion 26 Margin (see Chapter 11 notes) 7% 27 Turnover (use investment in assets in 28 equation) 29 2.88 times 30 Return on Investment 20% 31 32 Residual income $ 28,640 33 34 Part B: Analysis (4 marks) Explain in your own words using case data. Marks will not be awarded for textbook definitions) a. If management is evaluated based on ROI, will the project be accepted (expansion into 35 Canmore)? Why or why not