19. The directors of Nelson Plc are considering investment in new equipment at the end of October. The equipment would cost £100,000 and the finance director has asked you to forecast how much cash the company will have available at the end of October to at least partly finance the investment. You have been provided with the following information: a) The sales forecast for the period from June to October: July 175 June October Sales (Unit) Unit price August 210 September 235 £160 195 165 £145 £155 £170 £185 b) c) 35% of customers pay in the month of sale, the rest pay in the following month. Purchases are 65% of the sales revenue of the corresponding month. Half of the purchases are paid for immediately and half are paid for in the following month. Wages of £9,500 are paid monthly. The sales team earn commission of 4% of monthly sales revenue, and this is paid in the month following the sale. d) e) f) Charges for light and heat are £850 per month and are paid every 2 months starting from June. In July the company will dispose of some old machinery which has a net book value of £8,000. The machinery will be sold for £7,000 and the buyer will be given 1 month's credit. g) h) At the end of July, Nelson plc has a bank balance of £64,000. Required (a) Prepare a cash budget for each month from August to October.
19. The directors of Nelson Plc are considering investment in new equipment at the end of October. The equipment would cost £100,000 and the finance director has asked you to forecast how much cash the company will have available at the end of October to at least partly finance the investment. You have been provided with the following information: a) The sales forecast for the period from June to October: July 175 June October Sales (Unit) Unit price August 210 September 235 £160 195 165 £145 £155 £170 £185 b) c) 35% of customers pay in the month of sale, the rest pay in the following month. Purchases are 65% of the sales revenue of the corresponding month. Half of the purchases are paid for immediately and half are paid for in the following month. Wages of £9,500 are paid monthly. The sales team earn commission of 4% of monthly sales revenue, and this is paid in the month following the sale. d) e) f) Charges for light and heat are £850 per month and are paid every 2 months starting from June. In July the company will dispose of some old machinery which has a net book value of £8,000. The machinery will be sold for £7,000 and the buyer will be given 1 month's credit. g) h) At the end of July, Nelson plc has a bank balance of £64,000. Required (a) Prepare a cash budget for each month from August to October.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...
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