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 $150 million. Accounts receivable at the beginning of the year were $59 million. Wildcat has a 45-day collection period.

Wildcat’s purchases from suppliers in a quarter are equal to 40 percent of the next quarter’s forecast sales, and suppliers are normally paid in 36 days. Wages, taxes, and other expenses run about 20 percent of sales. Interest and dividends are $15 million per quarter.

Wildcat plans a major capital outlay in the second quarter of $94 million. Finally, the company started the year with a cash balance of $72 million and wishes to maintain a $30 million minimum balance.

Sales for the first quarter of the year after this one are projected at $150 million. Accounts receivable at the beginning of the year were $59 million. Wildcat has a 45-day collection period.

Explanation / Answer

a)

b1)

b2)

The net Cash cost for the year is (in millions)

Q1 Q2 Q3 Q4 Beginning Cash 30 30 30 30 Net Inflow -37 -67 35 37 Ending Cash Balance -7 -37 65 67 Minimum Cash Balance 30 30 30 30 Cumulative Surplus (deficit) -37 -67 35 37

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