This and the following two problems demonstrate that pro forma forecasts, cash budgets and cash flow forecasts all yield the same esti- mated need for external financing-provided you don't make any mis- takes. For problems 8, 9, and 10, you may ignore the effect of added borrowing on interest expense.

The treasurer of Pepperton, Inc., a wholesale distributor of household appliances, wants to estimate his company's cash balances for the first three months of 2009. Using the information below, construct a monthly cash budget for Pepperton for January through March 2009. Does it appear from your results that the treasurer should be concerned about investing excess cash or looking for a bank loan? Pepperton Selected Information Sales (20 percent for cash, the rest on 30-day credit terms): 2008 Actual October $ 360,000 November December 2009 Projected January February March Purchases (all on 60-day terms): 2008 Actual October November December 420,000 1,200,000 $600,000 240,000 240,000 $ 510,000 2009 Projected January February March Wages payable monthly Principal payment on debt due in March Interest due in March Dividend payable in March Taxes payable in February Addition to accumulated depreciation in March. Cash balance on January 1, 2009 Minimum desired cash balance 540,000 1,200,000 $ 300,000 120,000 120,000 $ 180,000 210,000 90,000 300,000 180,000 30,000 $300,000 150,000.AppendixLO1