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

1 WILDCAT, INC. Short-term Financial Plan ($ in millions) Q1 Q2 Q3 Q4   Target cash balance $ 20 $ 20 $ 20 $ 20   Net cash inflow 37.8 -24.64 3.64 25.4   New short-term investments 17.8 0 0 22.179169   Income on short-term investments 0 0.356 0   Short-term investments sold 0 17.8 0   New short-term borrowing 0 6.484 0   Interest on short-term borrowing 0 0.19452 0.0911556   Short-term borrowing repaid 0 0 3.44548 3.1296756   Ending cash balance 20 20 20 20   Minimum cash balance –20 –20 –20 –20   Cumulative surplus (deficit 0 0 0   Beginning short-term investments 0 0 0 0   Ending short-term investments 17.8 0 0 22.179169   Beginning short-term debt 0 0 6.484 3.1296756   Ending short-term debt 0 6.484 3.03852 0 Note 1: Net Cash Flow Q1 Q2 Q3 Q4 Opeining Cash Balance 32 Sales(Pojected) 105 90 122 140 Current Quarter Cash Collection(50% of Current Sales)i.e. 45 days /90 days *100 = 50% 52.5 45 61 70 Cash Collection from Opening Accounts receivable 34 52.5 45 61 Current Purchases 40.5 54.9 63 54 Payment for Purchase(60% of Current Purchase) i.e. 54 days / 90 days *100 i.e (54 days = 90days - 36 days of which payment not made) 24.3 32.94 37.8 32.4 Payment for opeining Accounts Payables 18.9 16.2 21.96 25.2 Opeining Accounts Receivable 34 52.5 45 61 Closing Accounts Recivable 52.5 45 61 70 Opeining Accounts Payable 18.9 16.2 21.96 25.2 Closing Accounts Payable 16.2 21.96 25.2 21.6 Wages and Others 31.5 27 36.6 42 Interest and Dividend 6 6 6 6 Capital Outlay 40 Net Cash Flow 37.8 -24.64 3.64 25.4 2 Net Cost = Total Interest Incurred - Total Interest Earned Total Interest Incurred 0.285676 Total Interest Earned 0.356 Net Cost -0.07032 3 WILDCAT, INC. Short-term Financial Plan ($ in millions) Q1 Q2 Q3 Q4   Target cash balance $ 10 $ 10 $ 10 $ 10   Net cash inflow 37.8 -24.64 3.64 25.4   New short-term investments 27.8 0 3.64 25.4   Income on short-term investments 0 0.556 0.07432 0.14712   Short-term investments sold 0 24.084 0 0   New short-term borrowing 0 0 0   Interest on short-term borrowing 0 0 0   Short-term borrowing repaid 0 0 0 0   Ending cash balance 10 10 10 10   Minimum cash balance 10 10 10 10   Cumulative surplus (deficit 0 0 0   Beginning short-term investments 0 27.8 3.716 7.356   Ending short-term investments 27.8 3.716 7.356 32.756   Beginning short-term debt 0 0 0 0   Ending short-term debt 0 0 0 0 Note 1: Net Cash Flow Q1 Q2 Q3 Q4 Opeining Cash Balance 32 Sales(Pojected) 105 90 122 140 Current Quarter Cash Collection(50% of Current Sales)i.e. 45 days /90 days *100 = 50% 52.5 45 61 70 Cash Collection from Opening Accounts receivable 34 52.5 45 61 Current Purchases 40.5 54.9 63 54 Payment for Purchase(60% of Current Purchase) i.e. 54 days / 90 days *100 i.e (54 days = 90days - 36 days of which payment not made) 24.3 32.94 37.8 32.4 Payment for opeining Accounts Payables 18.9 16.2 21.96 25.2 Opeining Accounts Receivable 34 52.5 45 61 Closing Accounts Recivable 52.5 45 61 70 Opeining Accounts Payable 18.9 16.2 21.96 25.2 Closing Accounts Payable 16.2 21.96 25.2 21.6 Wages and Others 31.5 27 36.6 42 Interest and Dividend 6 6 6 6 Capital Outlay 40 Net Cash Flow 37.8 -24.64 3.64 25.4 2 Net Cost = Total Interest Incurred - Total Interest Earned Total Interest Incurred 0 Total Interest Earned 0.77744 Net Cost -0.77744

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