Corporate_Finance_9th_edition_Solutions_Manual_FINAL0

The new collection float will be collection float

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Unformatted text preview: vious quarter Cash collections from sales 13. a. $75,000,000 64,800,000 $139,800,000 Quarter 2 $82,000,000 67,500,000 $149,500,000 Quarter 4 $104,000,000 73,800,000 $177,800,000 Quarter 4 $140,100,000 93,600,000 $233,700,000 A 45-day collection period means sales collections each quarter are: Collections = 1/2 current sales + 1/2 old sales A 36-day payables period means payables each quarter are: Payables = 3/5 current orders + 2/5 old orders So, the cash inflows and disbursements each quarter are: Q1 $68.00 210.00 173.00 $105.00 $86.40 63.00 12.00 $161.40 $173.00 161.40 $11.60 Q2 $105.00 180.00 195.00 $90.00 $98.55 54.00 80.00 12.00 $244.55 $195.00 244.55 –$49.55 Q3 $90.00 245.00 212.50 $122.50 $119.70 73.50 12.00 $205.20 $212.50 205.20 $7.30 Q4 $122.50 280.00 262.50 $140.00 $115.20 84.00 12.00 $211.20 $262.50 211.20 $51.30 Beginning receivables Sales Collection of accounts Ending receivables Payment of accounts Wages, taxes, and expenses Capital expenditures Interest & dividends Total cash disbursements Total cash collections Total cash disbursements Net cash inflow 507 The company’s cash budget will be: WILDCAT, INC. Cash Budget (in millions) Beginning cash balance Net cash inflow Ending cash balance Minimum cash balance Cumulative surplus (deficit) Q1 $64.00 11.60 $75.60 –30.00 $45.60 Q2 $75.60 –49.55 $26.05 –30.00 –$3.95 Q3 $26.05 7.30 $33.35 –30.00 $3.35 Q4 $33.35 51.30 $84.65 –30.00 $54.65 With a $30 million minimum cash balance, the short-term financial plan will be: WILDCAT, INC. Short-Term Financial Plan (in millions) b. Beginning cash balance Net cash inflow New short-term investments Income on short-term investments Short-term investments sold New short-term borrowing Interest on short-term borrowing Short-term borrowing repaid Ending cash balance Minimum cash balance Cumulative surplus (deficit) Beginning short-term investments Ending short-term investments Beginning short-term debt Ending short-term debt Q1 $30.00 11.60 –12.28 0.68 0 0 0 0 $30.00 –30.00 $0 $34.00 $46.28 $0 $0 Q2 $30.00 –49.55 0 0.93 46.28 2.34 0 0 $30.00 –30.00 $0 $46.28 $0 $0 $2.34 Q3 $30.00 7.30 –4.89 0 0 0 –0.07 –2.34 $30.00 –30.00 $0 $0 $4.89 $2.34 $0 Q4 $30.00 51.30 –51.40 0.10 0 0 0 0 $30.00 –30.00 $0 $0 $51.50 $0 $0 Below you will find the interest paid (or received) for each quarter: Q1: excess funds at start of quarter of $34 invested for 1 quarter earns .02($34) = $0.68 income Q2: excess funds of $46.28 invested for 1 quarter earns .02($46.28) = $0.93 in income Q3: shortage funds of $2.34 borrowed for 1 quarter costs .03($2.34) = $0.07 in interest Q4: excess funds of $4.89 invested for 1 quarter earns .02($4.89) = $0.10 in income 508 Net cash cost = $0.68 + 0.93 – 0.07 + 0.10 = $1.63 509 14. a. With a minimum cash balance of $50 million, the short-term financial plan will be: WILDCAT, INC. Short-Term Financial Plan (in millions) Beginning cash balance Net cash inflow New short-term investments Income on short-term investments Short-term investments sold New short-term borrowing Interest on short-term borrowing Short-term borrowing repaid Ending cash balance Minimum cash balance Cumulative surplus (deficit Beginning short-term investments Ending short-term investments Beginning short-term debt Ending short-term debt Q1 $50.00 11.60 –11.88 0.28 0 0 0 0 $50.00 –50.00 $0 $14.00 $25.88 $0 $0 Q2 $50.00 –49.55 0 0.52 25.88 23.15 0 0 $50.00 –50.00 $0 $25.88 $0 $0 $23.15 Q3 $50.00 7.30 0 0 0 0 –0.69 –6.61 $50.00 –50.00 $0 $0 $0 $23.15 $16.55 Q4 $50.00 51.30 –34.26 0 0 0 –0.50 –16.55 $50.00 –50.00 $0 $0 $34.26 $16.55 $0 Below you will find the interest paid (or received for each quarter: Q1: excess funds at start of quarter of $14 invested for 1 quarter earns .02($14) = $0.28 income Q2: excess funds of $25.88 invested for 1 quarter earns .02($25.88) = $0.52 in income Q3: shortage of funds of $23.15 borrowed for 1 quarter costs .03($23.15) = $0.69 in interest Q4: shortage of funds of $16.55 borrowed for 1 quarter costs .03($16.55) = $0.50 in interest Net cash cost = $0.28 + 0.52 – 0.69 – 0.50 = –$0.39 510 b. And with a minimum cash balance of $10 million, the short-term financial plan will be: WILDCAT, INC. Short-Term Financial Plan (in millions Beginning cash balance Net cash inflow New short-term investments Income on short-term investments Short-term investments sold New short-term borrowing Interest on short-term borrowing Short-term borrowing repaid Ending cash balance Minimum cash balance Cumulative surplus (deficit Beginning short-term investments Ending short-term investments Beginning short-term debt Ending short-term debt Q1 $10.00 11.60 –12.68 1.08 0 0 0 0 $10.00 –10.00 $0 $54.00 $66.68 $0 $0 Q2 $10.00 –49.55 0 1.33 48.22 0 0 0 $10.00 –10.00 $0 $66.68 $18.46 $0 $0 Q3 $10.00 7.30 –7.67 0.37 0 0 0 0 $10.00 –10.00 $0 $18.46 $26.13 $0 $0 Q4 $10.00 51.30 –51.45 0.15 0 0 0 0 $10.00 –10.00 $0 $26.13 $78.48 $0 $0 Below you will find the interest paid (or rec...
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