Consider the case: Mooney Equipment is putting together its cash budget for the following year and has forecasted expected cash collections over the next five quarters (one year plus the first quarter of the next year). The cash collection estimates are based on sales projections and expected collection of receivables. The sales and cash collection estimates are shown in the following table (in millions of dollars):

	Q1	Q2	Q3	Q4	Q5
Sales	$1,100	$1,400	$1,450	$1,250	$1,500
Total cash collections	$1,100	$1,150	$1,200	$1,200

You also have the following information about Mooney Equipment:

In any given period, Mooney's purchases from suppliers generally account for 74% of the expected sales in the next period, and wages, supplies, and taxes are expected to be 15% of next period's sales.

In the third quarter, Mooney expects to expand one of its plants, which will require an additional $1, 074 million investment.

Every quarter, Mooney pays $50 million in interest and dividend payments to long-term debt and equity investors.

Mooney prefers to keep a minimum target cash balance of at least S15 million at all times.

Using the preceding information, answer the following questions:

1. What is the net cash inflow that Mooney expects in the first quarter (Q1): -$1,037 million / -$191 million / -$185 million / -$196 million

2. If Mooney is beginning this year with a cash balance of $39 million and expects to maintain a minimum target cash balance of at least $16 million, what will be its likely cash balance at the end of the year (after Q4): -$350 million / -$1,387 million / -$159 million / -$1,572 million

3. What is the maximum investable funds that the firm expects to have in the next year? -$122 million / -$174 million / -$87 million / -$148 million

4. What is the largest cash deficit that the firm expects to suffer in the next year? -$1,587 million / -$952 million / -$1,111 million / -$794 million

5. Based on the surplus or deficit derived from the cash budget, managers negotiate for short-term loans with banks. They often add a cushion to the difference between forecasted ending cash balance and the minimum target cash balance. True / False

Answer rating: 100% (QA)

I have pasted the table below for illustrating the calculation Purchaes from suppliers is 74 of next ... View the full answer