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 &amp; 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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