Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Wildcat, Inc., has estimated sales (in millions) for the next four quarters as follows: Q1 Q2 Q3 Q4 Sales $ 120 $ 140 $ 160

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

Q1 Q2 Q3 Q4
Sales $ 120 $ 140 $ 160 $ 190

Sales for the first quarter of the year after this one are projected at $135 million. Accounts receivable at the beginning of the year were $53 million. Wildcat has a 45-day collection period.

Wildcats purchases from suppliers in a quarter are equal to 40 percent of the next quarters 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 $12 million per quarter.

Wildcat plans a major capital outlay in the second quarter of $72 million. Finally, the company started the year with a cash balance of $69 million and wishes to maintain a $30 million minimum balance.

a.

Complete the following cash budget for Wildcat, Inc. (Enter your answers in millions. Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places, e.g., 32.16.)

WILDCAT, INC. Cash Budget (in millions)
Q1 Q2 Q3 Q4
Beginning cash balance $ 69.00 $ $ $
Net cash inflow
Ending cash balance $ $ $ $
Minimum cash balance 30.00 30.00 30.00 30.00
Cumulative surplus (deficit) $ $ $ $

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-1.

Complete the following short-term financial plan for Wildcat, Inc. (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 $ 30.00 $ 30.00 $ 30.00 $ 30.00
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
Cumulative surplus (deficit) $ $ $ $
Beginning short-term investments $ $ $ $
Ending short-term investments $ $ $ $
Beginning short-term debt $ $ $ $
Ending short-term debt $ $ $ $

b-2.

What is the net cash cost (total interest paid minus total investment income earned) for the year? (Enter your answers in millions. Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Net cash cost $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Markets And Institutions

Authors: Anthony Saunders, Marcia Millon Cornett

1st International Edition

0071181334, 9780071181334

More Books

Students also viewed these Finance questions

Question

2. Explain about Single Phase Circuit with relevant diagrams.

Answered: 1 week ago

Question

Write short notes on RMS Value of AC waveforms.

Answered: 1 week ago

Question

=+Describe your point of view.

Answered: 1 week ago