Question 3 Digital Solutions Inc is preparing its cash collection summary for 2018. Digital ended 2017...
Question 3
Digital Solutions Inc is preparing its cash collection summary for 2018. Digital ended 2017 with cash of $81 million, and managers need to keep a cash balance of at least $75 million for operations.
Account Receivables are expected to total $11,284 million during 2018, and payments for the cost of services should reach $6,166 million. Estimate bad debt expense will be at $2,543 million.
During 2018, Digital expects to invest $1,825 million in new equipment and sell older assets for $115 million. Debt payments scheduled for 2018 will total $597 million. The company forecasts net income of $890 million for 2018 and plans to pay dividends of $338 million.
Prepare Digital Solutions cash balance for 2018. Will the cash receipts and payments leave Digital with the desired ending cash balance of $75 million, or will the company need additional financing? If it does, how much will it need?
Hint: cash collections - cash payments = ending cash - desired balance = financing (if needed)
Please give details as per this statement
Will the cash receipts and payments leave Digital with the desired ending cash balance of $75 million, or will the company need additional financing? If it does, how much will it need?
Homework Answers
| Particulars | Amount (in millions of dollar) |
| Beginning cash balance | $81.00 |
| Cash Receipt | |
| (+) Collection from customers | $8,741.00 |
| (11284-2543) | |
| (+) Sale of old asset | $115.00 |
| Total cash receipts | $8,856.00 |
| Cash Payment | |
| Cash payment for services & products | $6,166.00 |
| investment in new equipment | $1,825.00 |
| debt payment | $597.00 |
| dividend payment | $338.00 |
| Total cash Payment | $8,926.00 |
| Available cash balance | $11.00 |
| Additional financing (75 - 11) | $64.00 |
| Ending cash balance | $75.00 |
| Additional Financing of $ 64 Million Require | |
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