Prepare a cash budget for the XYZ Manufacturing Company, indicating receipts and disbursements for May, June, and July. The firm wishes to maintain at all times a minimum cash balance of $50,000. Determine whether or not borrowing will be necessary during the period, and if it is, when and how much. As of April 30, the firm had a balance of $50,000 in cash. Actual Sales Forecasted Sales January $120,000 May $80,000 February 110,000 June 95,000 March 100,000 July 105,000 April 90,000 August 115,000 Accounts receivable: 20% of total sales are for cash. The remaining 80% will be collected 60% during the following months, 30% one more month later, and 10% two more months later (the firm incurs a negligible bad-debt loss.) Cost of goods manufactured: 65% of sales: 80% of this cost is paid the following month and the remaining 20% one more month later. Selling, general, and administrative expenses: $15,000 per month plus 5% of sales. All of these expenses are paid during the month of incurrence. Interest payment: A semiannual interest payment on $1,500,000 of bonds outstanding (10% coupon) is paid during July. An annual $80,000 sinking-fund payment is also made at that time. Dividends: A $20,000 dividend payment will be declared and made in August. Capital expenditures: $60,000 will be invested in plant and equipment in June. Taxes: Income tax payments of $25,000 will be made in July. (Questions 6-10) In order to maintain the minimum cash balance of $50,000, how much (in cumulative amount) would have to be borrowed at the end of August? Group of answer choices $437,750.00 $508,950.00 None of them $205,000.00 $0.00 $235,400.00

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 5P

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Prepare a cash budget for the XYZ Manufacturing Company, indicating receipts and disbursements for May, June, and July. The firm wishes to maintain at all times a minimum cash balance of $50,000. Determine whether or not borrowing will be necessary during the period, and if it is, when and how much. As of April 30, the firm had a balance of $50,000 in cash. Actual Sales Forecasted Sales January $120,000 May $80,000 February 110,000 June 95,000 March 100,000 July 105,000 April 90,000 August 115,000 Accounts receivable: 20% of total sales are for cash. The remaining 80% will be collected 60% during the following months, 30% one more month later, and 10% two more months later (the firm incurs a negligible bad-debt loss.) Cost of goods manufactured: 65% of sales: 80% of this cost is paid the following month and the remaining 20% one more month later. Selling, general, and administrative expenses: $15,000 per month plus 5% of sales. All of these expenses are paid during the month of incurrence. Interest payment: A semiannual interest payment on $1,500,000 of bonds outstanding (10% coupon) is paid during July. An annual $80,000 sinking-fund payment is also made at that time. Dividends: A $20,000 dividend payment will be declared and made in August. Capital expenditures: $60,000 will be invested in plant and equipment in June. Taxes: Income tax payments of $25,000 will be made in July. (Questions 6-10) In order to maintain the minimum cash balance of $50,000, how much (in cumulative amount) would have to be borrowed at the end of August? Group of answer choices $437,750.00 $508,950.00 None of them $205,000.00 $0.00 $235,400.00

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