WILDCAT, INCORPORATED Short-Term Financial Plan (in millions) Target cash balance Net cash inflow New short-term investments Interest from short-term investments Short-term investments sold New short-term borrowing Q1 Q2 Q3 $ 20.00 $ 20.00 $ 20.00 $ Q4 20.00 1.57 0 0 0 0 0 0 Interest on short-term borrowing 0 0 0 Short-term borrowing repaid 0 0 0 Ending cash balance 20.00 $ 20.00 20.00 $ 20.00 Minimum cash balance -20.00 -20.00 -20.00 Cumulative surplus (deficit) 0 $ 0 $ 0 $ -20.00 0 Beginning short-term investments Ending short-term investments Beginning short-term debt Ending short-term debt Target cash balance Net cash inflow New short-term investments Income from 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 WILDCAT, INCORPORATED Short-Term Financial Plan (in millions) Q1 Q2 Q3 Q4 $ 40.00 $ 40.00 $ 40.00 $ 40.00
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Wildcat, Incorporated, has estimated sales (in millions) for the next four quarters as follows: |
| Q1 | Q2 | Q3 | Q4 | |
|---|---|---|---|---|
| Sales | $ 180 | $ 200 | $ 220 | $ 250 |
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Sales for the first quarter of the year after this one are projected at $195 million. Accounts receivable at the beginning of the year were $77 million. Wildcat has a 45-day collection period. |
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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 25 percent of sales. Interest and dividends are $10 million per quarter. |
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Wildcat plans a major capital outlay in the second quarter of $85 million. Finally, the company started the year with a cash balance of $81 million and wishes to maintain a minimum balance of $40 million. |
| 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. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in millions rounded to 2 decimal places, e.g., 32.16. Leave no cells blank - be certain to enter "0" wherever required.) |
| a-2. |
What is the net cash cost (total interest paid minus total investment income earned) for the year under this target cash balance? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in millions rounded to 2 decimal places, e.g., 32.16. Leave no cells blank - be certain to enter "0" wherever required.) |
| b-1. |
Complete the following short-term financial plan assuming that Wildcat maintains a minimum cash balance of $20 million. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in millions rounded to 2 decimal places, e.g., 32.16. Leave no cells blank - be certain to enter "0" wherever required.) |
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