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Wildcat, Incorporated, has estimated sales (in millions) for the next four quarters as follows:

Q1 Q2 Q3 Q4
Sales $ 185 $ 205 $ 225 $ 255

Sales for the first quarter of the following year are projected at $200 million. Accounts receivable at the beginning of the year were $79 million. Wildcat has a 45-day collection period.

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 20 percent of sales. Interest and dividends are $16 million per quarter.

Wildcat plans a major capital outlay in the second quarter of $96 million. Finally, the company started the year with a $82 million cash balance and wishes to maintain a $40 million minimum balance.

a-1.

Assume that Wildcat can borrow any needed funds on a short-term basis at a rate of 4 percent per quarter and can invest any excess funds in short-term marketable securities at a rate of 3 percent per quarter. Complete the following short-term financial plan for Wildcat. (Enter your answers in millions. Negative amounts should be indicated by a

WILDCAT, INCORPORATED
Short-Term Financial Plan
(in millions)
Q1 Q2 Q3 Q4
Target cash balance $40.00 $40.00 $40.00 $40.00
Net cash inflow
New short-term investments
Income on 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 -40.00 -40.00 -40.00 -40.00
Cumulative surplus (deficit)
Beginning short-term investments
Ending short-term investments
Beginning short-term debt
Ending short-term debt
a-2.

What is the net cash cost for the year under this target cash balance?

Complete the following short-term financial plan assuming that Wildcat maintains a minimum cash balance of $20 million.

WILDCAT, INCORPORATED
Short-Term Financial Plan
(in millions)
Q1 Q2 Q3 Q4
Target cash balance $20.00 $20.00 $20.00 $20.00
Net cash inflow
New short-term investments
Income on 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 -20.00 -20.00 -20.00 -20.00
Cumulative surplus (deficit)
Beginning short-term investments
Ending short-term investments
Beginning short-term debt
Ending short-term debt
b-2.

What is the net cash cost for the year under this target cash balance?

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