The following budget assumptions were used to construct the budget: Capel's total sales for each month were first calculated in the sales budget and are reflected on the first line of the cash budget. Capel's sales are made on credit with terms of 2/10, net 30. Capel's experience is that 25% is collected from customers who take advantage of the discount, 65% is collected in the second month, and the last 10% is collected in the third month after the sale. The budget assumes that there are no bad debts . The cost of materials averages 50% of Capel's finished product. The purchases are generally made one month in advance of the sale, and Capel pays its suppliers in 30 days. Accordingly, if July sales are forecasted at $1,320 million, then purchases during June would be $660 ($1,320 millionx 0.50), and this amount would be paid in July. . Other cash expenses include wages and salaries at 19% of sales, monthly rent of $48 million, and other expenses at 5% of sales. Estimated tax payments of $70 million and $73 million are required to be paid on July 15 and October 15, respectively. In addition, a $1,200 lion payment for a new plant must be made in September. Assume that Capel's targeted cash balance is $200, and the estimated cash on hand on July 1 is $230. Cash Budget For the Six Months Ended December 31, Year 1 ($ millions) May June $1,176 600 July $1,200 August September $1,236 630 october November December $1,212 $1,260 648 October $1,296 660 November Credit sales $1,140 $1,320 Credit purchases 618 July August September December Cash receipts Collections from this month's sales Collections from previous mont Collections from sales two months previously 297 323 h's sales 803 121 $1,233 819 124 $1,261 118 120 126 $1,195 $1,211 $1,291 Total cash receipts Cash disbursements Payments for credit purchases Wages and salaries Rent Other expenses Taxes Payment for plant construction 600 606 618 235 48 648 660 228 251 Total cash disbursements Net cash flow (Receipts - disbursements) Beginning cash balance Ending cash balance Target (minimum) cash balance Surplus (shortfall) cash $1,006 $945 $2,163 $1,007 $1,025 $180 $254 -126 $128 $266 128 $394 $166 $250 646 $396 -$126 $196 -$326 -$72 $194 e information provided in the budget to complete the following sentences. Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the x months of the year, Capel will Company will want a credit line of at least $ t that they will be able to invest up to $ to end the year with a cash to cover the month with the greatest shortfall, and the financial managers can tell the bank to and a cash in short-term marketable securities