Wildcat, Inc., has estimated sales (in millions) for the next four quarters as f
ID: 2472235 • Letter: W
Question
Wildcat, Inc., has estimated sales (in millions) for the next four quarters as follows:
Sales for the first quarter of the year after this one are projected at $140 million. Accounts receivable at the beginning of the year were $55 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 percent of sales. Interest and dividends are $10 million per quarter.
Wildcat plans a major capital outlay in the second quarter of $81 million. Finally, the company started the year with a cash balance of $70 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.)
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 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.)
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.)
Q1 Q2 Q3 Q4 Sales $125 $145 $165 $195Explanation / Answer
a. CASH BUDGET FOR WILDCAT, INC (AMOUNT IN MILLION DOLLARS)
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Q1 Q2 Q3 Q4
Beginning Cash balance 70.00 88.15 32.50 62.15
Net cash inflow (woring note) 18.15 -55.65 29.65 58.10
Ending csh balance 88.15 32.50 62.15 120.25
Minimum cash balance -30.00 -30.00 -30.00 -30.00
Cumulative Surplus/Deficity 58.15 2.50 32.15 90.25
WORKING NOTE :
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Q1 Q2 Q3 Q4
Sales 125 145 165 195
Collection: 50% in the quarter 62.5 72.5 82.5 97.5
50% next quarter 55.0(given) 62.5 72.5 82.5
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(A) Collection 117.5 135.0 155.0 180.0
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Purchases (45% of next quarter sales) 65.25 74.25 87.75 63,0
Payment: 60% in the quarter (54days) 39.15 44.55 52.65 37.8
40% in next quarter(36 days) 25.20 26.10 29.70 35.1
(B) total payment to suppliers 64.35 70.65 82.35 72.90
(C) Wages, taxes & other expenses
(20% of the month sales) 25.00 29.00 33.00 39.00
(D) Interest & Dividends (given) 10.00 10.00 10.00 10.00
(E) Capital outlay -- 81.00 -- --
(F) Net Cash Flows
= (A) -(B)-(C)-(D)-(F) 18.15 -55.65 29.65 58.1
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