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# Calculating the Cash Budget Wildcat Inc has estimated sales in millions for the next four quarters as Sales

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

Sales Q1\$210 Q2 \$180 Q3 \$245 Q4 \$280

Sales for the first quarter of the year after this one are projected at \$240 million. Accounts receivable at the beginning of the year were \$68 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 forecasted sales, and suppliers are normally paid in 36 days. Wages, taxes, and other expenses run about 30 percent of sales. Interest and dividends are \$12 million per quarter. Wildcat plans a major capital outlay in the second quarter of \$80 million. Finally, the company started the year with a \$64 million cash balance and wishes to maintain a \$30 million minimum balance.

A. Complete a cash budget for Wildcat by filling in the following:

WILDCAT, INC. Cash Budget (in millions)

Q1 Q2 Q3 Q4
Beginning Cash \$64 \$75.60 \$26.05 \$33.35
Net Cash Inflow \$11.60 \$-49.55 \$7.30 \$51.30
Ending Cash Balance \$75.60 \$26.05 \$33.35 \$84.65
Minimum Cash Balance -\$30 -\$30 -\$30 -\$30
Cumulative Surplus \$45.50 -\$3.95 \$3.35 \$54.65

B. 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. What is the net cash cost (total interest paid minus total investment income earned) for the year?

Short term financial Plan Q1 Q2 Q3 Q4

Beginning Cash Balance

Net Cash Inflow
New short term investment
Short term investment 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 investment
Ending Short term investments
Beginning Short term debt
Ending Short term debt

May 22 2020 View more View Less