Question

Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter which has been provided in the below table.

	Quarter in Coming Year					Following Year
	First	Second	Third	Fourth		First Quarter
Sales forecast	$388	$360	$342	$390		$390

Paymore’s labor and administrative expenses are $71 per quarter and interest on long-term debt is $46 per quarter. Paymore’s cash balance at the start of the first quarter is $40 and its minimum acceptable cash balance is $30. Assume that Paymore can borrow up to $342 from a line of credit at an interest rate of 2% per quarter. On average, one-third of sales are collected in the quarter that they are sold, and two-thirds are collected in the following quarter. Assume that sales in the last quarter of the previous year were $342. Also, one third of the orders are paid for in the current month and then two thirds of the next quarter's orders are paid in advance. Prepare a short-term financing plan using the above table. (Leave no cells blank. Enter '0' when necessary. Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in millions of dollars rounded to 2 decimal places.)

Quarter (figures in $ millions) First Second Third Fourth A. Cash requirements Cash required for operations Interest on bank loan Total cash required $0.00 $0.00 $0.00 $0.00 B. Cash raised in quarter Line of credit Total cash raised $0.00 $0.00 $0.00 $0.00 C. Repayments of bank loan $0.00 $0.00 $0.00 D. Addition to cash balances E. Line of credit Beginning of quarter End of quarter 0.00 0.00 0.00 0.00

Answer 1