Wildcat, Inc., has estimated sales (in millions) for the next four quarters as follows: Q1 Q2 Q3 Q4 Sales $ 105 $ 90 $ 122 $ 140 ________________________________________ Sales for the first quarter of the year after this one are projected at $120 million. Accounts receivable at the beginning of the year were $34 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 30 percent of sales. Interest and dividends are $6 million per quarter. Wildcat plans a major capital outlay in the second quarter of $40 million. Finally, the company started the year with a $32 million cash balance and wishes to maintain a $20 million minimum balance.
Problem 26-14 Cash Management Policy Wildcat, Inc., has estimated sales (in millions) for the next four quarters as follows: Q1 Sale s Q2 Q3 Q4 12 $105 $90 $ $140 2 Sales for the first quarter of the year after this one are projected at $120 million. Accounts receivable at the beginning of the year were $34 million. Wildcat has a 45day 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 30 percent of sales. Interest and dividends are $6 million per quarter. Wildcat plans a major capital outlay in the second quarter of $40 million. Finally, the company started the year with a $32 million cash balance and wishes to maintain a $20 million minimum balance. a- Assume that Wildcat can borrow any needed funds on a short-term basis at a 1. 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. Prepare a short-term financial plan by filling in the following schedule. (Enter your answers in millions. Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) Q1 Target cash balance Net cash inflow New shortterm investm ents Income on shortterm investm ents Short- $ 20 WILDCAT, INC. Short-term Financial Plan ($ in millions) Q2 Q3 $ 20 $ 20 Q4 $ 20 term investm ents sold New shortterm borrowin g Interest on shortterm borrowin g Shortterm borrowin g repaid Ending cash balance Minimu m cash balance Cumul ative surplus (deficit Beginni ng shortterm investm ents Ending shortterm investm ents Beginni ng shortterm debt Ending shortterm debt -20 -20 -20 a-2. What is the net cash cost for the year under this target cash balance? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) -20 Net cash cost $ 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. b- Complete the following short-term financial plan assuming that Wildcat maintains 1. a minimum cash balance of $10 million.(Enter your answers in millions. Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) WILDCAT, INC. Short-Term Financial Plan ($ in millions) Q1 Q2 Q3 Q4 Target cash balance Net cash inflow New short-term investments Income from short-term investments Short-term investments sold New short-term borrowing Interest on short-term borrowing Short-term borrowing repaid Ending cash balance Minimum cash balance $ -10 $ -10 $ -10 $ $ $ $ $ $ $ $ $ $ $ $ $ $ Cumulative surplus (deficit) Beginning short-term investments Ending short-term investments Beginning short-term debt Ending short-term debt $ -10 $ $ $ $ $ $ b- What is the net cash cost for the year? (Enter your answers in millions. Do 2. not round intermediate calculations and Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Net cash cost $
