Question

Wildcat, Inc., has estimated sales (in millions) for the next four quarters as follows: Q1 Q2 Q3 Q4 Sales $130 $150 $170 $200 Sales for the first quarter of the following year are projected at $145 million. Accounts receivable at the beginning of the year were $57 million. Wildcat has a 45-day collection period. Wildcat's purchases from suppliers in a quarter are equal to 50 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 $10 million per quarter. Wildcat plans a major capital outlay in the second quarter of $68 million. Finally, the company started the year with a $71 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 "O" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Wildcat, Inc., has estimated sales (in millions) for the next four quarters as follows:

Sales for the first quarter of the following year are projected at $145 million. Accounts receivable at the beginning of the year were $57 million. Wildcat has a 45-day collection period.

Wildcat’s purchases from suppliers in a quarter are equal to 50 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 $10 million per quarter.

Wildcat plans a major capital outlay in the second quarter of $68 million. Finally, the company started the year with a $71 million cash balance and wishes to maintain a $40 million minimum balance.

Answer 1

Wildcat Inc.
Short term financial plan
(In Million)
Particulars	Q1	Q2	Q3	Q4
Target Cash flow	$40	$40	$40	$40
Net cash flow	$71	0	0	0
New short term investments	26	$98	$34	$40
Income on short term investments	0	0	0	0
Short term investments sold	0	0	0	0
New short term borrowing	$57	0	0	0
Interest on short term borrowing	$10	$10	$10	$10
Short term borrowing repaid	$75	$85	$100
Ending Cash balance	$89.4	$63	-$16	$70
Minimum cash balance	-$40	-$40	-$40	-$40
Surplus(Deficits)	$49.4	$23	-$56	$30
Beginning short term investments	$57	0	0	0
Ending short term investments	0	0	0	0
Beginning short term debt	0	0	0	0
Ending short-term debt	0	0	0	0

Net cash cost

= Total cash-total liabilities

= $46.4-0

= $46.4

Wildcat Inc.
Short term financial plan
(In Million)
Particulars	Q1	Q2	Q3	Q4
Target Cash flow	$20	$20	$20	$20
Net cash flow	$71	0	0	0
New short term investments	26	$98	$34	$40
Income on short term investments	0	0	0	0
Short term investments sold	0	0	0	0
New short term borrowing	$57	0	0	0
Interest on short term borrowing	$10	$10	$10	$10
Short term borrowing repaid	$75	$85	$100
Ending Cash balance	$69.4	$43	-$36	$50
Minimum cash balance	-$20	-$20	-$20	-$20
Surplus(Deficits)	$49.4	$23	-$56	$30
Beginning short term investments	$57	0	0	0
Ending short term investments	0	0	0	0
Beginning short term debt	0	0	0	0
Ending short-term debt	0	0	0	0

Net cash cost

= Total cash-Total liabilities

= $46.4-0

= $46.4

In both the situations, where target cash is $40 and $20 results into similar net cash costs of $46.4