Question

Wildcat, Inc., has estimated sales (in millions) for the next four quarters as follows:

	Q1			Q2			Q3			Q4
Sales	$	105		$	125		$	145		$	175

Sales for the first quarter of the year after this one are projected at $120 million. Accounts receivable at the beginning of the year were $47 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 20 percent of sales. Interest and dividends are $11 million per quarter.

Wildcat plans a major capital outlay in the second quarter of $60 million. Finally, the company started the year with a $66 million cash balance and wishes to maintain a $40 million minimum balance.

a-1.

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. (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 answers to 2 decimal places, e.g., 32.16.)

WILDCAT, INC. Short-Term Financial Plan (in millions)
		Q1		Q2		Q3		Q4
Target cash balance		$ 40.00		$ 40.00		$ 40.00		$ 40.00
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		$		$		$		$

a-2.	What is the net cash cost for the year under this target cash balance? (Negative amount should be indicated by a minus sign. Enter your answer in millions. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Net cash cost

$

b-1.

Complete the following short-term financial plan assuming that Wildcat maintains a minimum cash balance of $20 million. (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 answers to 2 decimal places, e.g., 32.16.)

WILDCAT, INC. Short-Term Financial Plan (in millions)
		Q1		Q2		Q3		Q4
Target cash balance		$ 20.00		$ 20.00		$ 20.00		$ 20.00
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		$		$		$		$

b-2.	What is the net cash cost for the year under this target cash balance? (Enter your answer in millions. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Net cash cost

$

Answer 1

a.1	Working of Purchase and sales
	Particular	Previous Year Q4	Q 1	Q2	Q3	Q4
	Sales		105.00	125.00	145.00	175.00
	Purchase	47.25	56.25	65.25	78.75	54.00
	Particular	Previous Year Q4	Q 1	Q2	Q3	Q4
	Receipts
	Average monthly receivable received in next quarter (1/3)		47.00	35.00	41.67	48.33
	Cash Received of sales in same Quarter		70.00	83.33	96.67	116.67
	Income on short-term investments			1.38	0.55	1.26
	Total Receipts		117.00	119.71	138.88	166.26
	Payments
	Average monthly payable paid in next quarter (1/3)		15.75	18.75	21.75	26.25
	Payment made in the same Quarter	31.50	37.50	43.50	52.50	36.00
	Wages Taxes Other expenses		21.00	25.00	29.00	35.00
	Major Cash outlay			60.00
	Total Payment		74.25	147.25	103.25	97.25
	Net Cash Flow		42.75	(27.54)	35.63	69.01
	Particular		Q 1	Q2	Q3	Q4
	Opening Cash Balance		66.00	40.00	40.00	40.00
	Net Cash Flow		42.75	(27.54)	35.63	69.01
	Target closing balance		40.00	40.00	40.00	40.00
	Excess/(Deficit)		68.75	(27.54)	35.63	69.01
	New short-term investments		68.75		35.63	69.01
	Income on short-term investments			1.38	0.55	1.26
	Short-term investments sold			41.21
	New short-term borrowing
	Interest on short-term borrowing
	Short-term borrowing repaid
	Beginning short-term investments			68.75	27.54	63.17
	Ending short-term investments		68.75	27.54	63.17	132.18
	Beginning short-term debt
	Ending short-term debt
a.2	Net Cash cost		Q 1	Q2	Q3	Q4
			74.25	147.25	103.25	97.25
		Total	422.00
b.1	Working of Purchase and sales
	Particular	Previous Year Q4	Q 1	Q2	Q3	Q4
	Sales		105.00	125.00	145.00	175.00
	Purchase	47.25	56.25	65.25	78.75	54.00
	Particular	Previous Year Q4	Q 1	Q2	Q3	Q4
	Receipts
	Average monthly receivable received in next quarter (1/3)		47.00	35.00	41.67	48.33
	Cash Received of sales in same Quarter		70.00	83.33	96.67	116.67
	Income on short-term investments			1.78	0.54	1.26
	Total Receipts		117.00	120.11	138.88	166.26
	Payments
	Average monthly payable paid in next quarter (1/3)		15.75	18.75	21.75	26.25
	Payment made in the same Quarter	31.50	37.50	43.50	52.50	36.00
	Wages Taxes Other expenses		21.00	25.00	29.00	35.00
	Major Cash outlay			60.00
	Total Payment		74.25	147.25	103.25	97.25
	Net Cash Flow		42.75	(27.14)	35.63	69.01
	Particular		Q 1	Q2	Q3	Q4
	Opening Cash Balance		66.00	20.00	20.00	20.00
	Net Cash Flow		42.75	(27.14)	35.63	69.01
	Target closing balance		20.00	20.00	20.00	20.00
	Excess/(Deficit)		88.75	(27.14)	35.63	69.01
	New short-term investments		88.75		35.63	69.01
	Income on short-term investments			1.78	0.54	1.26
	Short-term investments sold			61.61
	New short-term borrowing
	Interest on short-term borrowing
	Short-term borrowing repaid
	Beginning short-term investments			88.75	27.14	62.77
	Ending short-term investments		88.75	27.14	62.77	131.78
	Beginning short-term debt
	Ending short-term debt
b.2	Net Cash cost		Q 1	Q2	Q3	Q4
			74.25	147.25	103.25	97.25
		Total	422.00