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

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

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

                                Q1                          Q2                          Q3                          Q4           

Sales                      $180                       $200                       $220                       $250        

 

Sales for the first quarter of the year after this one are projected at $195 million. Accounts receivable at the beginning of the year were $77 million. Wildcat has a 45-day collection period.

 

Wildcat's purchases from suppliers in a quarter are equal to 50 percent of the next quarter's forecasted sales, and suppliers are normally paid in 36 days. Wages, taxes, and other expenses run about 25 percent of sales. Interest and dividends are $10 million per quarter.

 

Wildcat plans a major capital outlay in the second quarter of $85 million. Finally, the company started the year with a cash balance of $81 million and wishes to maintain a minimum balance of $30 million.

 

A. Complete the following cash budget for Wildcat, Inc. (Enter your answers in millions. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your 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-1. Complete the following short-term financial plan for Wildcat, Inc. (Enter your answers in millions. A negative answer 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 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? (A negative answer should be indicated by a minus sign. Enter your answer in millions. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 

Net cash cost          $

Part A.png

Image transcription text

A E 4 (A) A 45-day collection period means sales collections each quarter are: 5 Collections = 1/2 current sales + 1/2 old sales 6 7 A 36-day payables period means payables each quarter are: 8 Payables = 3/5 current orders + 2/5 old orders 9 Current Year Next Year 10 Q1 Q2 Q3 Q4 Q1 11 Sales $180 $200 $220 $250 $130 12 13 WILDCAT, INC. 14 Cash Budget 15 (in millions) 16 Q1 Q2 Q3 Q4 17 Beginning Cash Balance $81.00 18 Net Cash Inflow 19 Ending Cash Balance 20 Minimum Cash Balance -$30.00 -$30.00 -$30.00 -$30.00 21 Cumulative surplus (deficit) 22 23...
Part B.png

Image transcription text

A B C D E F G H 22 23 24 (B-1) With a $30M minimum cash balance, the short-term financial plan will be: 25 26 WILDCAT, INC. 27 Short-Term Financial Plan 28 (in millions) 01 Q2 Q3 Q4 30 Minimum Cash balance $30.00 $30.00 $30.00 $30.00 Net Cash Inflow 32 New Short term Investments 33 Income From Short term Investments 34 Short term Investments sold 35 New Short term Borrowings Interest on Short Term Borrowings 37 Short term Borrowings repaid 38 Ending cash Balance 39 Minimum Cash Balance 10 Cumulative Surplus (deficit) 41 12 Beginning Short term Investments 43 Ending Short term Investments 44 Beginning Short term debt 45 Ending short term debt 16 47 18 (B-2) Net Cash Cost 19...

 

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