Rework Problem 13 assuming the following:

In Problem 13, Wildcat, Inc., has estimated sales (in millions) for the next four quarters as follows:

Sales for the first quarter of the year after this one are projected at $120 million. Accounts receivable at the beginning of the year were $34 million. Wildcat has a 45-day collection period.

Wildcat€™s purchases from suppliers in a quarter are equal to 45 percent of the next quarter€™s forecast sales, and suppliers are normally paid in 36 days. Wages, taxes, and other expenses run about 30 percent of sales. Interest and dividends are $6 million per quarter.

Wildcat plans a major capital outlay in the second quarter of $40 million. Finally, the company started the year with a $32 million cash balance and wishes to maintain a $15 million minimum balance.

What is the net cash cost (total interest paid minus total investment income earned) for the year?

WILDCAT,  INC.

Short-Term Financial Plan

($ in millions)

a. Wildcat maintains a minimum cash balance of $20 million.

b. Wildcat maintains a minimum cash balance of $10 million.

Based on your answers in (a) and (b), do you think the firm can boost its profit by changing its cash management policy? Should other factors be considered as well? Explain.

Qi Q2 Q3 24 Sales $105 $90 $122 $140 WILDCAT, INC. Cash Budget ($ in millions) Q Q2 23 04 Target cash balance Net cash inflow Ending cash balance Minimum cash balance Cumulative surplus (deficit) $15 15 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 $15