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 $170 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 forecast sales, and suppliers are normally paid in 36 days. Wages, taxes, and other expenses run about 25 percent of sales. Interest and dividends are $12 million per quarter.

Wildcat plans a major capital outlay in the second quarter of $75 million. Finally, the company started the year with a $64 million cash balance 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? (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

Cash Budget    ($ in Million) Q1 Q2 Q3 Q4 Beginning Cash Balance $ 64.00 $ 107.92 $ 115.00 $ 202.08 Net Cash Inflow 43.92 82.08 87.08 127.75 Capital Outlay 75.00 Ending Cash Balance $ 107.92 $ 115.00 $ 202.08 $ 329.83 Minimum Cash Balance $ -30.00 $ -30.00 $ -30.00 $ -30.00 Cumulative Surplus / Deficit $ 77.92 $ 85.00 $ 172.08 $ 299.83 Short Term Financial Plan Q1 Q2 Q3 Q4 Beginning Cash Balance $ 30.00 $ 30.00 $ 30.00 $ 30.00 Net Cash Inflow $ 43.92 $ 82.08 $ 87.08 $ 127.75 New Short Term Investments $ 0.00 $ 44.09 $ 7.12 $ 87.51 Income From Short Term Investments $ 0.17 $ 0.04 $ 0.43 $ 0.86 Short Term Investments Sold $ 0.00 $ 0.00 $ 0.00 $ 0.00 New Short Term Borrowing $ 0.00 $ 0.00 $ 0.00 $ 0.00 Interest on Short Term Borrowing $ 0.00 $ 0.00 $ 0.00 $ 0.00 Short Term Borrowing Repaid $ 0.00 $ 0.00 $ 0.00 $ 0.00 Capital Outlay $ 0.00 $ 75.00 $ 0.00 $ 0.00 Ending Cash Balance $ 74.09 $ 37.12 $ 117.51 $ 158.61 Minimum Cash Balance $ 30.00 $ 30.00 $ 30.00 $ 30.00 Current Surplus / Deficit $ 44.09 $ 7.12 $ 87.51 $ 128.61 Beginning Short Term Investments $ 34.00 $ 78.09 $ 85.21 $ 172.72 Ending Short Term Investments $ 78.09 $ 85.21 $ 172.72 $ 301.33 Beginning Short Term Debt $ 0.00 $ 0.00 $ 0.00 $ 0.00 Ending Short Term Debt $ 0.00 $ 0.00 $ 0.00 $ 0.00 Net Cash Cost (Interest Earned - Interest paid ) $ 1.50 Sales 160 175 190 215 170 Assuming that sales happen evenly during the quarter. That is Monthly Sales is equaly to Quarter Sales / 3 Accounts Receivable is calculated as Quarterly Sales /1.5 0 Purchases are assumed to be done at the beginning of the quarter for next quarter and payment made during the quarter itself Accounts Receivables opening Balance 68 Accounts Receivables at the end of quarter 106.6667 116.6667 126.6667 143.3333

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