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

Question

Wildcat, Inc., has estimated sales (in millions) for the next four quarters as follows Q1 Q2 Q3 Q4 Sales $150 $170 $190 $220 Sales for the first quarter of the year after this one are projected at $165 million. Accounts receivable at the beginning of the year were $65 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 20 sales. Interest and dividends are $14 million per quarter percent of Wildcat plans a major capital outlay in the second quarter of $91 million. Finally, the company started the year with a cash balance of $75 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)) to 2 decimal places. (e.g., 32.16) WILDCAT, INC Cash Budget (in millions) Q2 Q1 Q3 Q4 75.00 Beginning cash balance Net cash inflow Ending cash balance Minimum cash balance -30.00 -30.00 -30.00 -30.00 Cumulative surplus (deficit)

Explanation / Answer

Answer: 45-day collection period means sales collections = 1/2 current sales + 1/2 old sales

36-day payables period means payables = 3/5 current orders + 2/5 old orders

cash inflows are:

Q1 = $65 + 1/2($150)–2/5(.45)($150)–3/5(.45)($170)–.20($150)–$14

=$65+$75-$27-$45.9-$30-$14=$23.1

Q2 = 1/2($150) + 1/2($170)–2/5(.45)($170)–3/5(.45)($190)–.20($170)–$14–91

=$75+$85-30.6-51.3-34-14-91

=-$60.9

Q3 = 1/2($170) + 1/2($190)–2/5(.45)($190)–3/5(.45)($220)–.20($190)–$14

=$85+$95-34.2-59.4-38-14=34.4

Q4 = 1/2($190) + 1/2($220)–2/5(.45)($220)–3/5(.45)($165)–.20($220)–$14

=$95+$110-39.6-44.55-44-14=62.85

Beginning cash balance

Net cash inflow

Answer:b

Beginning cash balance

Net cash inflow

Wildcat Inc. Cash Budget (in millions) Particulars Q1 Q2 Q3 Q4

Beginning cash balance

75 98.1 37.2 71.6

Net cash inflow

23.1 -60.9 34.4 62.85 Ending cash balance 98.1 37.2 71.6 134.45 Minimum cash balance 30 30 30 30 Cumulative surplus (Deficit) 68.1 7.2 41.6 104.45

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