Question

Wildcat, Inc., has estimated sales in millions) for the next four quarters as follows: Sales Q1 $120 Q2 Q3 Q4 $140 $160 $190 Sales for the first quarter of the year after this one are projected at $135 million. Accounts receivable at the beginning of the year were $53 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 25 percent of sales. Interest and dividends are $12 million per quarter. Wildcat plans a major capital outlay in the second quarter of $72 million. Finally, the company started the year with a cash balance of $69 million and wishes to maintain a $30 million minimum balance. a. 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.) WILDCAT, INC. Cash Budget (in millions) 02 69.00 $ Q1 $ Beginning cash balance Net cash inflow Ending cash balance Minimum cash balance $ -30.00 -30.00 -30.00 -30.00 Cumulative surplus (deficit) $ 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.

Answer 1

		Collection in Q1 from Accounts Receivable of of last year($ million)		$53
				Q1	Q2	Q3	Q4	Q1(Next Year)
	A	Sales ($ million)		$120	$140	$160	$190	$135
	B=A*(45/90)	Collection from Sales of the Current Quarter		$60	$70	$80	$95
	C	Collection from Sales of the previous Quarter		$53	$60	$70	$80
	D=B+C	Total cash inflow during the quarter		$113	$130	$150	$175
		Cash Payments for purchase:	Q4 (last yr)	Q1	Q2	Q3	Q4
	E	Purchase for the quarter(40% of next quarters Sales)	$48	$56	$64	$76	$54
	F=E*(90-36)/90	Payment for the current quarters purchase	$28.80	$33.60	$38.40	$45.60	$32.40
	G	Payment for the Previous quarters purchase		$19.20	$22.40	$25.60	$30.40
	H=F+H	Total Cash Payment for purcahse		$52.80	$60.80	$71.20	$62.80
		Other Payments
	I=25%*A	Wages , Taxes etc		$30	$35	$40	$48
	J	Interest and dividends		$12	$12	$12	$12
	K	Capital outlay			$72
	L=H+I+J+K	Total Cash Outflow for the quarter		$94.80	$179.80	$123.20	$122.30
	M=D-L	Net Cash Inflow		$18.20	($49.80)	$26.80	$52.70
			($ Million)
			Q1	Q2	Q3	Q4
	N	Beginning Cash Balance	$69.00	$87.20	$37.40	$64.20
	O	Net cash Inflow	$18.20	($49.80)	$26.80	$52.70
	P=N+O	Ending Cash Balance	$87.20	$37.40	$64.20	$116.90
	Q	Minimum cash balance	($30.00)	($30.00)	($30.00)	($30.00)
	R=P+Q	Cumulative Surplus/(Deficit)	$57.20	$7.40	$34.20	$86.90