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 $190 million. Accounts receivable at the beginning of the year were $75 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 20 percent of sales. Interest and dividends are $11 million per quarter.

Wildcat plans a major capital outlay in the second quarter of $98 million. Finally, the company started the year with a cash balance of $80 million and wishes to maintain a $30 million minimum balance.

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.

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).)

What is the net cash cost for the year? (Negative amount should be indicated by a minus sign. Enter your answers in millions. 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

a,

Calculation of Net cash Inflow > Method of calculation given below.

Payment calculated as follows;

For Q1= Purchases 50% of Q2 sales = 50% * 195 = 97.5.

Payment to creditors = 97.5/90*36 = 39.

Similarly Q2 , Q3 & Q4 calculated in the same manner.

For Collection it is 45 days collection period =

For Q2= Q1 sales/90*45 = 175/90*45 = 87.5

Similarly Q2, Q3, and Q4 calculated in the same manner

Wages , taxes & other expense 20% of sales for the quarter.

Now, based on the above calculation cash budget for Wildcat inc as below :

Net Cash inflow Q1 Q2 Q3 Q4 Receivable 75 87.5 97.5 107.5 Supplier payment 39 43 49 38 Wages taxes & other exp 35 39 43 49 Int & dividends 11 11 11 11 Net cash Inflow -10 -5.5 -5.5 9.5

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