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:

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.

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. 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))

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.

Complete the following short-term financial plan assuming that Wildcat maintains 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))

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

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

Explanation / Answer

  Q1   Q2   Q3   Q4 N.Yr. Q1 105 90 122 140 120 Sales 40.5 54.9 63 54 Purchases Cash collections & Payments   Q1   Q2   Q3   Q4 N.Yr. Q1 Receivables Collecions Beg. a/cs. Recivables 34 Q1 Receivables 105 Q2 Receivables 90 Total Collections 0 34 105 90 Payments for Purchases 40.5 54.9 63 Wages,taxes& other exp. 31.5 27 36.6 42 Interest& Dividends 6 6 6 6 Capital Expenditure 40 Total Disbursements 37.5 113.5 97.5 111 Net cash flow -37.5 -79.5 7.5 -21 a. Min. cash bal.of 20 mns.   Q1   Q2   Q3   Q4 Summary Opening cash balance 32 20 20.0001 20.0011 32 Add:Total Collections 0 34 105 90 229 Less:Total Disbursements 37.5 113.5 97.5 111 359.5 Surplus/(Deficit) -5.5 -59.5 27.5001 -0.99888 -98.5 New short-term borrowing reqd. 25.5 79.6913 21.7375 126.9288 Int.on S.T.Borrowings -0.1913 -0.7889 -0.73861 -1.71879 S.T.Borrowings repaid -6.71 -6.71 Ending balance 20 20.0001 20.0011 20.0000 20.0000 Net Cash cost 1.7188 millions New S.T.Borrowing Bal. 120.2188 millions a.WILDCAT, INC. Short-term Financial Plan ($ in millions) Q1 Q2 Q3 Q4   Target cash balance $20 $20 $20 $20   Net cash inflow -5.5 -59.5 27.5001 -0.99888   New short-term investments   Income on short-term investments   Short-term investments sold   New short-term borrowing 25.5 79.6913 21.7375   Interest on short-term borrowing -0.19125 -0.78893 -0.73861   Short-term borrowing repaid -6.71   Ending cash balance -5.5 -59.5 27.5001 -0.99888   Minimum cash balance -20 -20 -20 -20   Cumulative surplus (deficit -25.5 -79.5 7.50005 -20.9989   Beginning short-term investments   Ending short-term investments   Beginning short-term debt 25.5 79.6913 -6.71 21.7375   Ending short-term debt 25.5 105.1913 98.4813 120.2188 b. Min. cash bal.of 10 mns.   Q1   Q2   Q3   Q4 Summary Opening cash balance 32 10 10.0001 10.0000 32 Add:Total Collections 0 34 105 90 229 Less:Total Disbursements 37.5 113.5 97.5 111 359.5 Surplus/(Deficit) -5.5 -69.5 17.5001 -11 -98.5 New short-term borrowing reqd. 15.5 79.6163 21.6625 116.7788 Int.on S.T.Borrowings -0.1163 -0.7134 -0.6625 -1.4921 S.T.Borrowings repaid -6.7867 -6.7867 Ending balance 10 10.0001 10.0000 10.0000 10.0000 Net Cash cost 1.4921 millions New S.T.Borrowing Bal. 109.9921 millions b..WILDCAT, INC. Short-term Financial Plan ($ in millions) Q1 Q2 Q3 Q4   Target cash balance $10 $10 $10 $10   Net cash inflow -5.5 -69.5 17.5001 -11   New short-term investments   Income on short-term investments   Short-term investments sold   New short-term borrowing 15.5 79.6163 21.6625   Interest on short-term borrowing -0.11625 -0.71337 -0.66247   Short-term borrowing repaid -6.7867   Ending cash balance -5.5 -69.5 17.5001 -11   Minimum cash balance $10 $10 $10 $10   Cumulative surplus (deficit 4.5 -59.5 27.50005 -1.00002   Beginning short-term investments   Ending short-term investments   Beginning short-term debt 15.5 79.6163 -6.7867 21.6625   Ending short-term debt 15.5 95.1163 88.3296 109.9921

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