Question 3

Digital Solutions Inc is preparing its cash collection summary for 2018. Digital ended 2017 with cash of

$81 million, and managers need to keep a cash balance of at least $75 million for operations.

Collections from customers are expected to total $11,284 million during 2018, and payments for the cost of services should reach

$6,166 million. Operating expense payments are budgeted at $2,543.

During 2018, Digital expects to invest $1,825 million in new equipment and sell older assets for $115 million. Debt payments scheduled for 2018 will total $597 million. The company forecasts net income of $890 million for 2018 and plans to pay dividends of $338 million.

Prepare Digital Solutions cash balance for 2018. Will the cash receipts and payments leave Digital with the desired ending cash

balance of $75 million, or will the company need additional financing? If it does, how much will it need?

Hint: cash collections - cash payments = ending cash - desired balance = financing (if needed)