7. The company plans to spend ZMW 10,000 on marketing and advertising inJanuary 2023 and a further ZMW5, 000 in the same area in March 2023.8. Administration overheads are budgeted at ZMW500 per month: 60% is paid in themonth of usage and the balance one month later.9. Fixed assets will be depreciated at 25% per annum of the initial investment capital.Required:i) Prepare the Cash Budget by month for the first quarter of 2016.Identify and comment on those areas of the cash budget that you wish to draw to theattention of management and recommend action to be taken. QUESTION ONEZambeka limited is a modern company that offers customised products to its clients. Thecompany has received some seed fund (cash) that will be used as equity capitalamounting to ZMW150, 000 on January 1 2023.You have just been engaged by the company to prepare a cash budget for the first threemonths of the 2023 using the information given below:1. The Budgeted sales for the first quarter of 2023 are expected to be ZMW240,000.Since the company will be launching the same year, sales are expected togradually pick as product awareness increases. It is assumed that 15% of the firstquarter sales will be in January, 30% in February and the remainder in March. Ifthese projections hold it is anticipated that annual sales in 2023 will be ZMW1,000,000.2. Clients must pay a deposit of 5% of the price when the order is made. Paymentsof 45% and 50% of the der pricemonth one an month twobe paidfollowing the month of sale. The company does not plan for any defaultingcustomers (Bad Debts).3. The company will employ six staff and each will be paid ZMW4,500 at the end ofeach month.4. The company plans to procure materials for the jobs for a value of ZMW 100,000in January. A deposit of 25% is payable on collections and the balance is paid inequal instalments in February and March.5. The company will rent offices at a cost of ZMW6, 500 per month paid three monthsin advance at the start of the lease contract. The landlord charges a securitydeposit of 10% for each of three month's rent.6. The production costs are paid in the month they are incurred and have been budgetas follows:JanuaryFebruaryMarchZMW 1,300ZMW 4,200ZMW 8,000

A Cash budget is a plan of the cash inflows and cash outflows over a period of time. A Cash budget…

Required: i) Prepare the Cash Budget by month for the first quarter of 2016. Identify and comment on those areas of the cash budget that you wish to draw to the attention of management and recommend action to be taken.

Required: i) Prepare the Cash Budget by month for the first quarter of 2016. Identify and comment on those areas of the cash budget that you wish to draw to the attention of management and recommend action to be taken.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 12PROB

See similar textbooks

Similar questions

13. An investment requires working capital equal to 15% of the year’s sales revenue to be in place at the start of the relevant year. The sales revenue for the three year project is forecast as £80,000, £100,000 and £90,000. What is the cashflow relating to working capital at time 2? A £1,500 outflow B £3,000 outflow C £1,500 inflow D £3,000 inflow
Help
During the year, Stan Company earned net come of P60,000. For next year, it has a capital budget of P80,000. If the company's plowback ratio is 30%, how much external funding is needed for the capital investment project?
Calculate the annual cost of a project that has an initial cost of P 3,000,000 and an additional cost of P 1,000,000 at the end of every ten years. The annual operating cost will be P 100,000 at the end of every year for the first four years and P 160,000 thereafter. In addition, there is expected to be a recurring major rework cost of P 300,000 every 13 years. Assume i = 15%. P 4,281,936 P 3,694,182 P 592,480 P 642,290
Research and development cost for Herald Corporation for the year ended December 31, 2018: Project A - Expected total revenues P7,000,000, starting in early 2018. Expected total costs will be P5,000,000. Costs incurred to date, all in 2019, are P2,200,000. Project B - Expected total revenues P6,000,000. Costs incurred to date are P3,500,000. Expected total costs are P4,500,000. The commencement of commercial sales is uncertain due to problems in raising funds to cover the final development costs. Project C - Expected total revenues, P3,500,000 with P1,000,000 of revenue already earned in 2018. Total development costs incurred, all in 2018, were P3,800,000. Research projects. Total costs spend in 2018 were P1,500,000. What total amount should be charged against income in 2018 related to the research and development costs?
Projected income statement for a project for years 1 and 2: Revenues $4,000 and $5,000; COGS $2,500 and $3,000; Depreciation $500 and $400; EBIT $1,000 and $1,600. Initial capital investment is $3,000. Working capital is 6% of the expected revenue; investment in working capital is made at the beginning of each year. The firm pays 14% on its profit. Estimate liquidation value Group of answer choices $2,000 $2,100 $2,600 $3,000
Calculate the annual cost of the project that has an initial cost of P2.5 Million and an additionalinvestment cost of 1 Million at the end of every ten years. The annual operating cost will beP100,000 at the end of every year for the first four years and P150,000 thereafter. In addition,there is expected to be recurring major rework cost of P200,000 every 13 years. Assume i =10%
The DPWH expects the cost of maintenance for a particular piece of heavy equipment to be P 50,000 in year 1, P 55,000 in year 2 and amounts increasing by P 5,000 through year 10. At an interest rate of 12% per year, the present worth of the maintenance cost is nearest to: P 583,837 P 421,685 P 383,782 P 221,678
NPV Calculate the net present value (NPV) for the following 15-year projects. Comment on the acceptability of each. Assume that the firm has a cost of capital of 9%. A. Initial investment is $1,000,000; cash inflows are $150,000 per year. B. Initial investment is $2,500,000; cash inflows are $320,000 per year. C. Initial investment is $3,000,000; cash inflows are $365,000 per year.
A firm has a capital budget of $100 which must be spent on one of twoprojects, with any unspent balance being placed in a bank depositearning 15%. Project A involves a present outlay of $100 and yields $321.76after 5 years. Project B involves a present outlay of $40 and yields $92after one year. Calculate:(i) the IRR of each project;(ii) the B/C ratio of each project, using a 15% discount rate.What are the project rankings on the basis of these investment decisionrules? Suppose that if Project B is undertaken its benefit can bereinvested at 17%; what project should the firm choose? Show yourcalculations (spreadsheet printout is acceptable as long as entries areclearly labeled).
What is the maximum that should be invested in a project at time zero if the inflows are estimated at $40,000 annually for three years, and the cost of capital is 9%? a)$101,251.79 b)$109,200.00 c)$117,871.97 d)$130,800.00
An investment has an installed cost of $527,630. The cash flows over the four-year life of the investment are projected to be -$212,200, $243,800, $203, 500 and $167,410, respectively. If the discount rate iss 10%, what is the project's NPV? $134,002.54 $94, 684.03 $275,814.36 - $ 251,815.64