Problem $26-14$ Cash Management Policy

Wildcat, Incorporated, has estimated sales $($in millions$)$ for the next four quarters as follows:

Q$1$ Q$2$ Q$3$ Q$4$

Sales $ $140$ $ $160$ $ $180$ $ $210$

Sales for the first quarter of the year after this one are projected at $$155$ million. Accounts receivable at the beginning of the year were $$61$ million. Wildcat has a $45-$day collection period.

Wildcat$$s purchases from suppliers in a quarter are equal to $45$ percent of the next quarter$$s forecast sales, and suppliers are normally paid in $36$ days. Wages, taxes, and other expenses run about $25$ percent of sales. Interest and dividends are $$10$ million per quarter.

Wildcat plans a major capital outlay in the second quarter of $$76$ million. Finally, the company started the year with a cash balance of $$73$ million and wishes to maintain a minimum balance of $$40$ million.

a$-1.$

Assume that Wildcat can borrow any needed funds on a short$-$term basis at a rate of $3$ percent per quarter and can invest any excess funds in short$-$term marketable securities at a rate of $2$ percent per quarter. Complete the following short$-$term financial plan for Wildcat. $($A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in millions rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.$ Leave no cells blank $-$ be certain to enter $"0"$ wherever required.$)$

a$-2.$

What is the net cash cost $($total interest paid minus total investment income earned$)$ for the year under this target cash balance? $($A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in millions rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.$ Leave no cells blank $-$ be certain to enter $"0"$ wherever required.$)$

b$-1.$

Complete the following short$-$term financial plan assuming that Wildcat maintains a minimum cash balance of $$20$ million. $($A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in millions rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.$ Leave no cells blank $-$ be certain to enter $"0"$ wherever required.$)$

b$-2.$

What is the net cash cost for the year under this target cash balance? $($A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in millions rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.$ Leave no cells blank $-$ be certain to enter $"0"$ wherever required.$)$