Question: Recalculate Dynamic Mattress's financing plan (Table 20.7) assuming that the firm wishes to maintain a minimum cash balance of $10 million instead of $5 million.

Recalculate Dynamic Mattress's financing plan (Table 20.7) assuming that the firm wishes to maintain a minimum cash balance of $10 million instead of $5 million. Assume the firm can convince the bank to extend its line of credit to $45 million.

First Second Third Fourth 1 Quarter: Panel A: Cash Requirements Cash required for operations Interest on bank loan Interest on stretched payables Total cash required $ 15 -$ 26 $45 -$ 35 0.8 0.8 0.6 4 0.8 $45 - $24.4 $15.8 -$34.4 Panel B: Cash Raised in Quarter Bank loan $40 2$ 9. Stretched payables Securities sold Total cash raised 10 15.8 11 $45 $15.8 12 0. 13 Panel C: Repayments Of stretched payables Of bank loan 14 $15.8 15 $31.4 16 8.6 17 Panel D: Addition to Cash Balances 18 2$ 19 20 Panel E: Bank Loan Beginning of quarter End of quarter $ 40 21 $ 40 $31.4 22 40 40 31.4 %24

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