Tangled Hairbrush company has the following Sales and Purchases. Actual figures are italicized while forecast figures...
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Tangled Hairbrush company has the following Sales and Purchases. Actual figures are italicized while forecast figures are not. April May June July September $ 300,000 $ 310,000 $365,000 August $380,000 $375,000 $ 395,000 $ 175,000 $ 185,000 $ 200,000 $ 210,000 $ 195,000 $ 190,000 Tangled collects 15 percent of its sales in the same month, 65 percent the following month and 20 percent in the month after that. It pays 25% of its purchases in the month after they're incurred, and 75% in the following month. Labor is 22% of sales and paid the month it is incurred. Overhead expense is 13,000 for each month. Tangled will pay interest of 26,000 in June and September. It will pay 48,000 in cash money dividends in June. Estimated tax payments of 25,000 will be made in June and September. It plans on purchasing plant and equipment in September for 225,000. Sales Purchases Construct a cash budget for June through September. The minimum desired balance is 10,000, use a line of credit if necessary to keep the ending cash balance above 10,000 (10,000 is the beginning cash balance for June). The maximum desired cash balance is 40,000. Put balances above 40,000 into marketable securities at the end of the period to keep the ending cash balance from going over 40,000. This is similar to the way that the line of credit works, but in the opposite direction. You may want to use a table structured like this: Net Cash Flow Beginning Balance 10,000 Cumulative Cash Balance Monthly Loan Cumulative Loan Monthly Marketable Cumulative Marketable Ending Cash Balance Tangled Hairbrush company has the following Sales and Purchases. Actual figures are italicized while forecast figures are not. April May June July September $ 300,000 $ 310,000 $365,000 August $380,000 $375,000 $ 395,000 $ 175,000 $ 185,000 $ 200,000 $ 210,000 $ 195,000 $ 190,000 Tangled collects 15 percent of its sales in the same month, 65 percent the following month and 20 percent in the month after that. It pays 25% of its purchases in the month after they're incurred, and 75% in the following month. Labor is 22% of sales and paid the month it is incurred. Overhead expense is 13,000 for each month. Tangled will pay interest of 26,000 in June and September. It will pay 48,000 in cash money dividends in June. Estimated tax payments of 25,000 will be made in June and September. It plans on purchasing plant and equipment in September for 225,000. Sales Purchases Construct a cash budget for June through September. The minimum desired balance is 10,000, use a line of credit if necessary to keep the ending cash balance above 10,000 (10,000 is the beginning cash balance for June). The maximum desired cash balance is 40,000. Put balances above 40,000 into marketable securities at the end of the period to keep the ending cash balance from going over 40,000. This is similar to the way that the line of credit works, but in the opposite direction. You may want to use a table structured like this: Net Cash Flow Beginning Balance 10,000 Cumulative Cash Balance Monthly Loan Cumulative Loan Monthly Marketable Cumulative Marketable Ending Cash Balance
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To draw the Cash Flow Diagram for this investment you can represent the cash flows over the 10year p... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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