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CIRCLEZ, Inc., has estimated sales (in millions) for the next four quarters as follows: Q1 Q2 Q3 Q4 SALES 160 175 190 215 Sales for the first quarter of the year after this one are projected at $170 million. Accounts receivable at the beginning of the year were $68 million. CIRCLEZ has a 45-day collection period. CIRCLEZ'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 25 percent of sales. Interest and dividends are $12 million per quarter. CIRCLEZ plans a major capital outlay in the second quarter of $75 million. Finally, the company started the year with a $64 million cash balance and wishes to maintain a $30 million minimum balance. a. Complete a cash budget for CIRCLEZ by filling in the following: CIRCLEZ CORPORATION CASH BUDGET (in millions) Q1 Q2 Q3 Q4 Target cash balance $30 Net cash inflow Ending cash balance Minimum cash balance 30 Cumulative surplus (deficit) b. Assume that DIGCAT can borrow any needed funds on a short-term basis at a rate of 3 percent per quarter and can invest any excess funds in short-term marketable securities at a rate of 2 percent per quarter, beginning short-term investment was $34.00 and had not any short-term debt. Prepare a short-term financial plan by filling in the following schedule. What is the net cash cost (total interest paid minus total investment income earned) for the year? CIRCLEZ CORPORATION SHORT-TERM FINANCIAL PLAN (in millions) Q1 Q2 Q3 Q4 Target cash balance $30 30 30 30 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) 0 0 0 Beginning short-term investments $34 Ending short-term investments Beginning short-term debt Ending short-term debt 0 CIRCLEZ, Inc., has estimated sales (in millions) for the next four quarters as follows: Q1 Q2 Q3 Q4 SALES 160 175 190 215 Sales for the first quarter of the year after this one are projected at $170 million. Accounts receivable at the beginning of the year were $68 million. CIRCLEZ has a 45-day collection period. CIRCLEZ'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 25 percent of sales. Interest and dividends are $12 million per quarter. CIRCLEZ plans a major capital outlay in the second quarter of $75 million. Finally, the company started the year with a $64 million cash balance and wishes to maintain a $30 million minimum balance. a. Complete a cash budget for CIRCLEZ by filling in the following: CIRCLEZ CORPORATION CASH BUDGET (in millions) Q1 Q2 Q3 Q4 Target cash balance $30 Net cash inflow Ending cash balance Minimum cash balance 30 Cumulative surplus (deficit) b. Assume that DIGCAT can borrow any needed funds on a short-term basis at a rate of 3 percent per quarter and can invest any excess funds in short-term marketable securities at a rate of 2 percent per quarter, beginning short-term investment was $34.00 and had not any short-term debt. Prepare a short-term financial plan by filling in the following schedule. What is the net cash cost (total interest paid minus total investment income earned) for the year? CIRCLEZ CORPORATION SHORT-TERM FINANCIAL PLAN (in millions) Q1 Q2 Q3 Q4 Target cash balance $30 30 30 30 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) 0 0 0 Beginning short-term investments $34 Ending short-term investments Beginning short-term debt Ending short-term debt 0

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